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et  de  haut  en  bas,  en  prenant  le  nombre 
d'images  nAcessaire.  Les  diagrammes  suivants 
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1 

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4 

5 

6 

MICROCOPY   RESOLUTION   TEST   CHART 

(ANSI  and  ISO  TEST  CHART  No    2) 


1.0 


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P.2 


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1.8 


^  /APPLIED  IM^GE 

S^.  16'i3    Ea5i    Ma."    SIteet 

S'.S  Rocheste'.    New    rorh  U609        USA 

.^Si  (716)    iei  '  0100  -  Phone 

^S  <''6)   288  -  5989  -  Fax 


FOREIGN  FINANCIAL  CONTROL 
IN  CHINA 


fe- 


THI  MACMILLAN  COMPAinT 

mw  TOBK  •   BOiTOM  •  CHICAGO 

ATLAMTA  •  »AM  nUMCISCO 

MACMILLAN  ft  CO..  Lmrno 

LOHSOM  •  BOMSAV  •   CALCUTTA 
MBUOVSMS 

7HB  MACMILLAN  CO.  OF  CANADA,  Vio. 

TOMMTO 


FOREIGN  FINANCIAL 
CONTROL  IN  CHINA 


BY 


T.  W.  OVERLACH 


THE  MACMILLAN  COMPANY 
1919 


AU  riohU  rutrvid 


Hd-A^'- 


233766 


':>s 


CnrrKinnr,  inio 
By  TKK   MACMIt.LAN  COMPANY 


Sn  up  and  elcrtrotji.H.     PubliohrU.  Jsnusry,  1919 


TO 

THE  MEMORY  OP 

WILLARD  D.  STRAIGHT 


CONTENTS 


THEORETICAL  INTRODUCTION 

l"oreign  encroachment  on  China  (i),  StruRgle  of  inter- 
national f'"ancial  interests  (ii).  Conquest  by  railroad  and 
bank  (ii),  Jhina  important  center  of  world  politics  (iii), 
Necessity  for  cleartr  vision  in  international  affairs  (iii), 
Task  (iii),  Definitions:  "Spheres  of  Interest."  "Spheres 
of  influence"  (iv),  "Open  Door"  (vi),  Railroad  "conces- 
sions" (vii),  "Co.trol"  denotes  certain  "Financial  Safe- 
guards" (viii),  i'oieigners  have  no  right  to  political  con- 
trol (x).  Abuses  of  "Control"  (x).  Method  of  Investiga- 
tion   (xii). 


PACE 


CHAPTER  I 

Historical  iNTRontxTioN :  Foreign  Rklations  with 
China  before  1895 

The  East  India  Company;  Monopoly  (i).  The  "Hong" 
as  intermediary  (2),  Lord  Macartney's  attempts  to  estab- 
lish direct  relations  with  (Thincsc  government  (3),  Con- 
ditions of  trade  at  beginning  of  loth  century  (  Abol- 
ishment of  East  India  Company's  Monopoly  '  Lor" 
Palmerton's  instructions  to  Lord  Napier  (5),  r  ission 
of  Elliott  as  Comptroller  (6),  Treaty  c*'  Nanki  „,  Con- 
cessions to  British  (7).  John  Quincy  ^rlanT!  •■1  the  Opium 
War  (8),  Foreign  relations  with  Chin^'  re-iiain  unstable 
(9).  License  and  violence  o'  'he  fore-R  •■  do),  French 
and  British  interference  (10  I  -eaty  of  \>  iitsin  provides 
for  British  diplomatic  agent  ,,i).  Est^ibiishes  "Extra- 
territoriality" (12).  Foundation  of  "Tsungli  Yamen" 
(15),  Formation  of  Maritime  Customs  Service  (16),  Un- 
satisfactory state  of  affairs  (17),  Expansion  of  trade  (18), 
British  jwlicy  of  non-interference  (21),  French  in  Tonking 
and  Annam  (22),  British  secure  counter-concessions  (23), 
Burma  and  Sikkim  pass  under  British  rule  (23).  Chino- 
Japanese  war  opens  new  political  problems  (24),  The 
"  battle  of  concessions  "  of  1897  to  1898  (24),  Play  of  eco- 
nomic forces  (26). 


VI 


CONTENTS 


CHAPTER  II 
Great  Britain 

Great    Britain's    "open    door"    policy    (27),    Lease    of 
Weihaiwei  and  Russia's  advance  in  the  north  (28),  France 
in  Ytinnan,  British  secure  counter-concessions   (28),  Ex- 
tension of   Hongkong    (29),   Non-alienation  of   Yangts/e 
Region    {30),    Preferential   advantages   of   other    Powers 
(31),  British  counter-demands  (32),  "After  consultation 
with  the  Admiral"   (\^),  2,800  miles  of  railway  conces- 
sions  (33),  Delimination  of  British  and  Russian  spheres 
(34),  Of  British  and  German  spheres  (35),  Lord  Salisbury 
and  Mr.  Hay  on  the  "open  door"  (38),  China  attempts 
to  bar  foreign  capital   (39),  Indemnity  loans   (40),  For- 
eign pressure  and  the  Boxer  Rebellion  (41),  Opinion  of  a 
rebel  leader  (41).  Russia's  duplicity  (42),  Anglo-Japanese 
alliance  (43),  Powerful  influence  of  local  vested  interests 
(45),  The  Hongkong  and  Shanghai  Banking  Corporation 
and  British  j^overnment  support   (47),  British  Syndicate, 
the    British    and    Chinese    Corporation's    monopoly    (48), 
British    "control"    (40),    Shanhaikuan-Newchwang    rail- 
way contract  (50),  "Control"  previsions  (51),  Shanghai- 
Nanking   Railway  contract    (33),   C;.nton-Kowloon   Rail- 
way agreement  (54),  Peking  Syndicate's  rights  rn  Shansi 
and   Honan    (55),   Willard   Straight  on   "control"    (57), 
Kent's   summary :    Syndicate   "  mortgagee   in   possession  " 
(58),  British  control:  private,  financial,  and  non-political 
(60),  Admittance  of  non-British  interests  to  British  sphere 
(60),    The    Chinese    Central    Railways    and    international 
amalgamation   (61),  Advent  of  Deutsch-Asiatische  Bank 
(62),    British    misgivings    (63),    British    "laissez-faire" 
policy  (64),  Hobson  on  International  Finance  (66),  Fur- 
ther railway  concessions    (67). 


PAGE 

27 


RfSSIA 


CHAPTER  III 


Russian  imperialism  (69),  Designs  upon  Chinese  ter- 
ritory (70).  Siberian  Railway  (71),  Russia  and  Li  Hung 
Chang  (73),  "Yellow  Peril"  argument  (74),  Cassini 
convention  (75),  Manchurian  Railway  agreement  (78) 
Political  aspect  of  Russo-Qiinese  Bank  (78).  The  bank 
and  the  Chinese  Eastern  Railway  (79),  Land  grants  (79) 
Troop  movements  (80),  Railway  controlled  by  Russian 
government  (82),  Russian  "control"  nominally  financial, 
m  fact  political  and  military  (83),  Railway  "guards" 
(84),  Railway  part  of  Transsiberian  system  (84),  Rus- 
sian domination  of  North  Manchuria  (80,  Russia's  ad- 
vance mto  Southern  Manchuria  (85),  Lease  of  Port  Ar- 
thur (85),  Russification  of  Manchuria  (87),  Russo-British 


69 


CONTENTS 


animosities  (88),  Russo-French-Belgian  cooperation  (91), 
Sir  Claude  MacDonald's  protest  (92),  Belgian  "control" 
financial  (94),  Further  Russo-Belgian  schemes  (94).  Se- 
cret Russo-Chinese  convention  (97),  Treaty  of  Ports- 
mouth (100),  A  check  to  Russian  ambitions  (lOi),  Rus- 
sian administration  of  railway  "zones"  (102),  Concilia- 
tory post-bellum  attitude  (108).  Russia  and  Japan  mutually 
guarantee  their  respective  spheres  (no),  New  railway 
enterprises  (in).  Advance  upon  Mongolia  (n2),  Rus- 
sia's attitude  toward  Asiatic  peoples   (116). 


vn 


PAGE 


CHAPTER  IV 
France 1^9 

F.arly  intercourse  with  China  (n9).  Shaping  of  railway 
policy  (120),  Penetration  of  Southern  China  (121).  Eco- 
nomic and  political  motives  (122),  Mr.  Hazen  on  French 
foreign    policy    (123),    Mr.    Doumer's    railway    program 
'  (124),  China  grants  railway  rights  to  France  (126),  Lease 

of  Kuangchouwan  (126),  Chinese  "non-alienation"  decla- 
rations   (127),   French   Chamber  authorizes   construction 
■  (128),  French  syndicate  concessionaire  Yunnan  Railway 

•  ( 128),  French  "  control  "  (130),  "  Policy  of  Colonization  " 

I  (131),    Furtherance    of    French    Commerce    (131).    Pro- 

hibitive freight  rates  (132),  Expansion  of  French  am- 
bitions (133),  Franco-Russian  cooperation  (134).  Govern- 
ment safeguards  French  interests  (136). 


CHAPTER  V 
Germany ....   137 

Occupation  of  Kiaochau  (137),  German  indifference  as 
to  future  of  China  (139),  Prince  Biilow  on  the  partition 
of  China  (139),  Railway  concessions  (141),  The  Shantung 
Railway  Company  and  the  Deutsch-Asiatische  Bank  (143), 
"Control"  by  governor  of  Kiaochau  (144).  China  has  no 
right  to  assume  control  (145),  Shantung  German  sphere 
of  interest  (145),  "Control"  nominally  financial  (146), 
Political  aspect  of  German  "control"  (147),  British 
German  agreement  (147),  Splendid  location  of  Tsingtau 
(149),  Later  railway  concessions  (150),  Coordination  of 
German  finance  and  industry  (151),  Government  promo- 
tion of  foreign  financial  enterprise  (151),  Concentrated 
upon  exclusively  German  success  (152),  Purpose  of 
Deutsch-Asiatische  Bank  (153),  German-British  cooper- 
ation (154),  Elimination  of  Germany's  interests  (i5S). 


LwS 


via 


CONTENTS 


CHAPTER  VI 


Japan 


PAGE 


The  Russian  peril  (156).  The  Korean  question  (157), 
Humiliation  of  Japan  by  Russia,  France  and  Germany 
(158).  Sagacity  of  "Elder  Statesmen"  (160),  Motives  of 
Japan's  foreign  policy  (161),  Economic  difficulties  (162), 
China:  Japan's  commercial  hope  (164),  Treaty  of  Ports- 
mouth unsatisfactory  (165),  Transfer  of  Russia's  Man- 
churian  interests  to  Japan  (165),  The  South  Manchurian 
Railway  Company  (167),  Large  scope  of  enterprise  (168), 
"Guards"  and  "zones"  (169),  Close  connection  of  com- 
pany with  Japanese  government  (171),  Japanese  "con- 
trol" in  South  Manchuria  (171),  Economic  paternalism 
(172),  The  Hsinmintung-Fakumen  project  (173),  Chin- 
chau-Aigun  and  Kirin-Changchun  Railways  (175';,  Mili- 
tary aspect  of  South  Manchurian  system  (176),  The 
evacuation  period  (177),  Japanese  pledges  to  doctrines 
(178),  Count  Oknma  claims  strict  adherence  to  Inter- 
national Law  (181),  Japan's  justification  (181),  Russian 
precedence  (182),  Russo-Japanese  agreements  mean  di- 
vision of  interest  (18.3),  Monarchical-paternalistic  form 
of  government  (185),  Significance  of  Japanese-Britis'i 
Alliance  (186),  Japan  seizes  German  possession  in  Shan- 
tung (187),  Occupation  of  German  railway  (188),  Fur- 
ther concessions  from  China  (188),  United  States-Japan 
agreement  of  1917  to  disperse  suspicions  (191),  Latest 
Russo-Japanese  conventions  (192),  American  recognition 
of  Japan's  "special  interests"  in  China  (193),  "Pax 
Japonica"  (195). 

CHAPTER  VH 
United  States iq6 

Unselfishness  (196).  Secretary  of  State  declines  partici- 
pation in  Chinese  war  (197).  Anson  Burlingame  advocates 
"open  door"  (197^.  Mr.  Hay's  "Open  door"  notes  (199), 
I-'iirther  steps  towards  permanent  safety  of  China  (200), 
Mr.  Taft  on  the  "open  door"  (202),  .American  participa- 
tion in  financial  development  of  China  (204),  Mr.  Harri- 
niau's  Manchurian  Railroad  Scheme  (205),  Mr.  Knox's 
"Neutralization"  Scheme  (205),  Refused  by  Russia  and 
Japan  (207),  Mr.  Leroy-Beaulieu's  opinion  (209), 
Strengthening  of  American  prestige  (210),  Admission  of 
American  capital  to  interlational  loans  (211),  President 
Wilson  refuses  support  (213),  Directed  against  certain 
"control"  provisions  (213),  American  criticism  (214), 
The  American  International  Corporation  (217),  Latest 
loan  proposals  (217),  American  Japanese  agreement  of 
1917  (218). 


CONTENTS 


IX 


CHAPTER  VIII 
International  Control  .... 


PAGE 
220 


Early  international  loans.  Secured  by  Maritime  Cus- 
toms Revenue  (220),  "Control"  (221),  Anglo-German 
Tientsin-Pukow  railway  agreement  (222),  "Control"  re- 
mains with  Chinese  government  (224),  Favorable  terms 
(225),  Unsatisfactory  operation  (226),  Anglo-American- 
French-German  "Hukuang"  loan  (227),  Final  agreement 
(229),  "Control"  {230),  scured  by  salt,  likin,  and  rice 
tax  (231),  In  case  of  default  to  be  administered  by  Mari- 
time Cust.  ms  Service  (232),  Lenient  "control"  provisions 
(232),  "Four  Powers"  currency  loan  (234),  "Control" 
over  administrative  expenditures  (235),  China's  financial 
plight  (236),  Quadruple  syndicate  advances  funds  (239). 
President  gives  firrn  option  to  banks  (240),  A  "  Belgian  " 
loan  (241),  Its  political  aspect  (242),  China's  breacii  of 
faith  (243),  Four  Power  Syndicate's  protest  (244),  Stand- 
point of  British  foreign  office  (244),  Addition  of  Russia 
and  Japan  (246),  Mr.  Willard  Straight's  summary  on  loan 
negotiations  (247),  Vital  question  of  "control"  (251), 
Chinese  opposition  (251),  Sir  Edward  Grey's  approval  of 
group  action  (252),  Independent  loans  (253),  The  "Crisp" 
loan  (253),  Hypothecation  of  surplus  revenues  of  Salt 
Gabelle  (254),  Crisp  gives  up  privilege  (255),  Continu- 
ation of  international  loan  negotiations  (256),  Interna- 
tional rivalry  (256).  America's  withdrawal  (257),  Final 
"Reorganization  loan"  agreement  (257),  Charge  upon 
salt  revenues  (258),  Central  Salt  Adriinistration  under 
international  "control"  (259),  Chiiiese  opposition  (262), 
Necessity  of  loan  (263),  Necessity  for  supervision  over 
expenditure  and  revenues  (266),  Responsibility  of  Bankers 
(267),  Satisfactory  result  of  salt  reform  (268),  Vindica- 
tion of  "control"  (268). 

Conclusion 270 

Important  aspects  of  the  problem  (270),  Foreign  com- 
mercial pressure  on  China  (271),  Profit  of  the  West  (272), 
Burden  of  indemnities  (272),  Chinese  obstruction  (273), 
Stability  of  China's  foreign  policy  (274),  Foreign  powers 
moderate  their  policies  (275),  Count  Hayashi  on  foreign 
combinations  (275),  International  finance  as  a  peace 
maker  —  Quotation  from  J.  A.  Hohson  (276),  Slow  Trans- 
formation of  China  (279),  Advisability  of  international 
cooperation  and  "control"  (279),  Necessity  for  tolerant 
spirit  of  mutual  respect  (280). 

Bibliography 283 


-jT^'-wsai: 


THEORETICAL  INTRODUCTION 

With  the  conclusion  of  the  Chino-Japanese  War  in 
1895,  a  new  era  opened  in  the  Far  East,  an  era  of  rapid 
encroachment  on  China  by  powerful  western  nations  and 
by  Japan.  These  power  ?  secured  strategic  bases  on  Chi- 
nese territory  and  sought  to  control  certain  parts  of  the 
Empire  through  the  medium  of  railways.  Railway  con- 
cessions, and  to  some  extent  public  loans,  were  the  instru- 
ments by  which  the  foreign  powers  advanced  and  carried 
out  their  policies.  The  obvious  tendency  of  foreign  am- 
bitions at  this  time  in  regard  10  railway  enterprise  was 
to  secure  a  monopoly  of  rights  within  socalled  "  spheres 
of  interest,"  and  as  far  as  possible  to  exclude  Chinese 
as  well  as  other  foreigners  not  only  from  securing  con- 
cessions but  also  from  any  share  in  the  contro'  or  manage- 
ment of  those  railways  that  were  to  be  constructed  in  their 
respective  spheres. 

Though  at  first  sight  political,  and  fought  by  diplom- 
acy, the  struggle  for  foreign  control  in  China  was  not 
less  one  of  international  financial  interests,  contending 
for  the  exploitation  of  new  opportunities  for  investment. 
Foreign  capital  was  attracted  by  the  great  profits  to  be 


vpn 


^aw™s^f*!!! 


'•  INTRODUCTION 

gained  from  the  impending  industrial  revolution  of  China. 
In  order  to  eliminate  financial  competition  of  other  na- 
tions or  to  counteract  political  moves  on  the  part  of  other 
governments,  if  such  were  destined  to  be  harmful  to  its 
own  expansion,  foreign  finance  often  solicited,  and  freely 
received,  diplomatic  protection.     With  a  protection  and 
promotion   of    foreign   enterprise   several   governments 
combined   the  furtherance  of  national  ambitions  of  a 
more  or  less  political  character.     All  banks  and  syndi- 
cates in  charge  of  the  railways  and  loans  became  more 
and  more  generally  recognized  as  indispensable  means  to 
the  political  and  commercial  ends  of  their  respective  gov- 
ernments.    The  struggle  for  foreign  control  in  China 
has  accordingly  been  marked  by  a  most  singular  and  dis- 
tinguishing feature,  namely,  the  closest  possible  coopera- 
tion between  foreign  finance  and  foreign  policy.     The 
period  was  one  of  "  conquest  by  railroad  and  bank." 

The  tenacious  determination  on  the  part  of  several 
powers  to  control  their  respective  spheres  to  the  greatest 
possible  exclusion  of  their  competitors  not  only  tended  to 
prejudice  China's  integrity  but  also  the  full  and  free  en- 
joyment of  the  treaty  rights  of  others.  Though  protest- 
ing vehemently  and  professing  adherence  to  tho  "  open 
door  "  doctrine  nations  viewed,  nevertheless,  with  jeal- 
ousy the  preserves  seized  by  others.  They  were  driven 
to  bitter  diplomatic  strife  over  each  new  prospective 
"  sphere."     In  short,  the  tremendous  pressure  of  modem 


•  •• 

in 


INTRODUCTION 

imperialism  coupled  with  modem  capitalistic  enterprise 
was,  in  China  as  elsewhere  on  earth,  a  constant  menace 
to  peace ;  and  a  continued  application  of  imperialistic  poli- 
cies to  exclusively  national  ends  might  again  make  for 
war,  as  soon  as  the  present  conflict  is  over.  For  China 
will  unquestionably  become  once  more  one  of  the  principal 
centers  of  world  politics,  m  which  Great  Britain,  Russia, 
France,  Germany,  Japan,  and  the  United  States  are  con- 
cerned. 

But  whatever  the  future  relations  of  these  nations  in 
reference  to  China  may  be,  it  would  appear  that  a  clearer 
vision  in  international  afifairs  would  go  far  towards  pre- 
venting further  hostilities,  namely,  if  each  nation,  with 
unprejudiced  mind,  would  candidly  consider  the  claims  of 
an  opponent  as  well  as  its  own  and  would  seek  to  strike  a 
fair  balance  by  mutual  concession.  Such  is  at  least  what 
we  propose  to  do  in  the  following  rr-odest  contribution  to 
the  study  of  recent  and  present  day  financial  and  political 
activities  of  foreign  powers  in  China.  We  shall  adopt 
a  sympathetic  view  and  attitude  towards  all  the  powers 
concerned,  trying  to  g"  ve  justice  to  each,  instead  of  seeing 
things  through  the  colored  glasses  of  nations.!  ambitions. 
To  offer  a  solution,  to  give  suggestions  oi  to  pass  judg- 
ment can  obviously  not  fall  within  the  scope  of  our  inves- 
tigation. We  merely  aim  to  give  a  comparative  and 
scientific  account  of  what  we  consider  the  most  tangible 
and  concrete  problem  of  the  otherwise  so  elusive  Far 


I  ? 


IV  INTRODUCTION 

Eastern  Question,  namely,  the  problem  of  "  P'oreig 
Financial  Control  in  China." 

Before  we  can  ofifer  a  definite  program  for  our  invest 
gation  we  shall  have  to  define  our  task  more  clearly.  T 
that  end  it  will  be  necessary  to  analyze  certain  theoretic; 
phrases  in  their  application  to  our  problem  and  to  reduc 
them  to  their  true  meanings.  And  we  shall  not  be  held  t 
anticipate  unduly  if  we  define,  at  the  outset,  terms  vvhic 
will  constantly  reappear,  although  detailed  illustratior 
will  as  a  matter  of  course  have  to  be  reserved  for  thei 
proper  places. 

The  principal  phrases  which  we  have  in  mind  are 
"  spheres  of  interest,"  "  spheres  of  influence,"  "  indepenc 
ence,"  "  open  door,"  "  concessions,"  and  "  control." 

One  thing  common  to  all  these  terms  is  their  flexibilit) 
for  they  have  been  used  with  the  greatest  latitude  c 
meaning  and  have  been  applied  to  a  great  variety  c 
relations;  but  through  all  their  uses  run  certain  speci: 
characteristics  which  may  be  determined  with  a  fair  d( 
gree  of  accuracy.^  The  most  confusing  terms,  ofte 
used  interchangeably  even  in  theoretical  literature,'*  ai 
"  spheres  of  interest  "  and  "  spheres  of  influence."  i 
"  sphere  of  interest  "  is  officially  earmarked  by  non-alien£ 

1  Sec  P.  S.  Reinsch,  "  Colonial  Government,"  page  103. 

2  W.  E.  Hall  and  L.  Oppenheim,  both  of  whom  will  be  quot< 
below,  in  their  treatises  on  International  Law,  fail  to  distinguis 
clearly  between  the  two  phrases,  apparently  only  having  conditior 
in  Africa  in  mind.  See  Hall,  pages  129  to  131,  and  Oppenheim,  Vc 
I,  page  297. 


mrmmmmim 


"  Foreign 

ir  investi- 
arly.  To 
heoretical 
to  reduce 
be  held  to 
ms  which 
astrations 
for  their 

nind  are: 
independ- 
:rol." 
lexibility ; 
.titude  of 
ariety  of 
in  special 
1  fair  de- 
ns, often 
ture,^  are 
:nce."  A 
Dn-aliena- 


be  quoUd 
distinguish 
;  conditions 
nhcim,  Vol. 


INTRODUCTION  v 

tion  declarations  extracted  from  the  Chinese  Government 
and  officially  created  by  an  agreement  between  two 
powers.  It  refers  to  an  area  frequently  adjacent  to  a 
possession  or  a  protected  or  leased  territory  within  which 
area  the  foreign  power  claims  the  primary  right  of  eco- 
nomic exploitation.^  Its  essential  element  is  a  negative 
one;  namely,  the  term  express*.^  the  principle  that  no 
other  power  except  the  one  in  wiiose  favor  the  "  sphere 
of  mterest "  exists  shall  be  permitted  to  acquire  conces- 
sions or  to  exert  any  control  or  influence  whatsoever  — 
not  to  speak  about  military  occupation  —  at  the  same  time 
giving  the  privileged  povver  a  monopoly  of  the  right  to 
seek  concessions.*  This  privilege,  however,  does  by  no 
means  entitle  its  holder  to  any  positive  exercise  of  "  in- 
fluence "  within  the  sphere  which  would  change  the 
"  sphere  of  interest  "  into  a  "  sphere  of  influence."  For 
the  latter  term,  which  never  has  been  used  officially,  as 
far  as  China  is  concerned,  suggests  a  certain  degree  of 
authority  or  control,  either  financial  or  political,  exer- 
cised by  a  foreign  power  within  a  certain  territory. 

Political  control,  however,  has  to  stop  short  of  chang- 
ing  the    "  sphere    of    influence "    into    a   protectorate. 

'  Foreign  "  spheres  "  in  China  are,  legally,  only  economic  spheres 
in  contrast  to  the  political  spheres  of  Africa. 

*  See  Reinsch,  page  103.  Otto  Kobner,  "  Kolonialpolitik,"  page 
14:  "Strang  rechtlich  hetrachtet  liegt  also  nur  ein  pactum  de  ex- 
cludendo  alium  vor.  .  .  .  Erfolgt  von  Seiten  einer  dritten  Macht 
ein  Widerspruch  nicl.t,  so  ist  rechtlich  ein  ius  excludendi  alios,  alien 
fremden  Machten  gegeniiber  entstanden." 


vi  INTRODUCTION 

Though  eventual  occupation  may  be  contemplated,  the  re- 
gion has  "  not  actually  been  so  reduced  into  control  that 
the  minimum  of  the  powers  which  are  implied  in  a 
protectorate  can  be  exercised  with  tolerable  regular- 
ity."' 

As  long  as  control  consists  merely  of  a  legitimate  pro- 
tection of  the  financier,  subject  to  agreements  of  an  ex- 
clusively financial  nature,  no  objection  can  be  raised  by 
anybody.  But  as  soon  as  the  exercise  of  a  reasonable 
financial  control  changes  into  the  exercise  of  an  adminis- 
trative control  or  an  assumption  of  territorial  supremacy 
l)y  a  foreign  power,  without  any  sanction  on  the  side  of 
the  Chinese,  such  control  would  seriously  menace  the 
supreme  sovereign  authority,  in  other  words,  the  inde- 
pendence, of  China.  l-"or  one  of  the  marks  of  an  inde- 
pendent state  is  that  "  it  is  independent  of  external  con- 
trol." «  *'  In  the  interest  of  the  territorial  supremacy 
of  other  states,  a  state  is  not  allowed  to  send  its  troops 
...  or  its  police  forces  into  .  .  .  foreign  territory,  or 
to  exercise  an  act  of  admin'  -ation  or  jurisdiction  on 
foreign  territory  without  permission."  ^ 

The  wielding  of  a  political  control  would  also  be  violai- 
ing  the  socalled  "  open  door  "  policy.  For  this  policy 
lims  to  be  an  instrument  for  the  maintenance  of  the  integ- 
rity of  China  and  the  preservation  of  an  "  equal  oppor- 

'•  See  W.  E.  Hall,  "  International  Law,"  page  129. 

•See  Hall,  op  cit.,  page  17. 

■  See  L.  Oppenheim,  "  International  Law,"  Vol.  I,  page  179. 


f 


INTRODUCTION  vii 

tunity  for  all."  It  is  mainly  directed  against  the  assump- 
tion of  an  undue  administrative  control  or  territorial 
supremacy  within  a  "  sphere."  It  is,  however,  not  ex- 
plicitly opposed  to  the  policy  of  "  spheres  of  interest," 
and  not  necessarily  to  the  "  sphere  of  influence  "  as  long 
as  influence  means  financial  control  within  reasonable 
I)ounds.  Indeed,  the  "  open  door  "  principle  recognizes 
the  "  vested  rights  "  and  "  special  interests  "  within  such 
spheres  as  long  as  a  certain  amount  of  opportunity  for 
others  is  preserved,  that  is,  as  long  as  the  Chinese  treaty 
tariff  is  indiscriminately  applied,  as  long  as  treaty  ports 
are  kept  open  and  as  long  as  no  liarlx)r  dues  or  railroad 
charges  are  levied  higher  than  those  imposed  upon  sub- 
jects of  the  country  in  whose  favor  the  "  sphere  "  exists. 
The  principle  is  also  more  or  less  opposed  to  the  acquisi- 
tion of  a  monopoly  in  the  supply  of  railway  materials  and 
rolling  stock. 

To  return  to  the  term  "  sphere  of  interest  " :  The 
interests  have  invariably  taken  the  form  of  the  socalled 
railroad  "  concessions."  The  term  concession  has  l^een 
as  loosely  applied  as  the  other  phrases.  Railroad  con- 
cessions are  agreements,  conferring  on  the  foreigner  cer- 
tain rights  of  financing,  building  and  managing  of  rail- 
roads. In  several  cases  where  the  railroad  grants  have 
been  made  under  conditions  which  deprive  China  of  al- 
most all  control  and  profit  in  the  several  imdertakings, 
and  which  lead  to  political  control  and  therefore  prejudice 


vni  INTRODUCTION 

her  sovereign  rights  within  the  "  sphere,"  the  term  "  ces- 
sion "  might  be  more  appropriate  than  "  concession."  In 
many  cases  the  *'  concessions,"  that  is,  the  railroad  agree- 
ments, are  simply  in  the  nature  of  underwriting  contracts. 
In  no  instance  have  the  Chinese  parted  with  the  ultimate 
property  in  the  railways. 

The  grantor  of  the  railway  concessions  as  well  as  the 
principal  claimant  of  capital  was  the  Chinese  Govern- 
ment.    But  while  to  strong  and   reliable  govenmients 
money  is  entnisted  unconditionally,  China's  political  in- 
security, together  with  her  financial  inexperience,  forced 
the  foreign  financier  to  maintain  a  great  amount  of  con- 
trol over  his  investments.     The  principal  feature  of  all 
railroad  agreements  then  are  the  "  control  "  clauses,  and 
the  word  "  control  "  in  this  connection  is  being  used  "  to 
denote  certain  financial  safeguards  for  the  protection  of 
loan  funds  "  in  the  interest  of  the  owners  and  the  bond- 
holders."    These  safeguards  either  consist  of  a  firsi  mort- 
gage upon  the  railway  if  owned  by  the  Chinese  Govern- 
ment and  in  a  certain  share  in  the  management  of  the 
line  in  order  to  prevent  fraud  and  to  secure  efificiency  and 
an  adequate  return,  since  the  lenders  usually  are  entitled 
to  a  share  in  the  profits  of  the  line.     Or  "  control  "  means 
direct  management  by  the  foreign  owners,  if  the  railway 
is  nominally  a  private  foreign  and  Chinese  joint  stock 

"  The  quotations  in  the  definition  of  control  have  been  taken  from 
W.  D.  Straight,  "Recent  Developments  in  China,"  page  131. 


INTRODUCTION  Ix 

company  in  which  the  Chinese  in  the  natural  course  of 
things  had  but  httle  share. 

The  word  "  control  "  similarly  refers  to  loans,  in  which 
connection  it  signifies  certain  "  guarantees  against  im- 
proper loan  fund  expenditure,"  and  secures  principal  and 
interest  by  some  special  hypothecation  and  the  supervision 
or  management  thereof  —  as,  for  instance,  when  the 
revenue  of  customs,  taxes,  or  some  monopoly  is 
pledged. 

Furthermore  has  the  word  "  control,"  though  inac- 
curately, been  used  in  connection  with  certain  monopolies, 
which  interest  us  only  secondarily.  On  the  one  hand 
have  the  contracting  bankers  occasionally  "  controlled  " 
the  supply  of  railway  materials  and  rolling  stock  by  stipu- 
lating that  such  were  to  be  purchased  from  the  manufac- 
turers of  their  respective  countries.  On  the  other  hand 
did  the  bankers  through  national  or  international  monop- 
olistic syndicates  attempt  to  "  control  "  the  money  supply 
to  China. 

The  main  points  we  now  mean  to  emphasize,  are: 

First,  that  the  "  control  "  clauses  embodied  in  the  sev- 
eral concessions  as  well  as  loan  agreements  are  nominally 
of  a  financial  character.  All  railways  and  loans  are  nom- 
inally, as  far  as  foreigners  are  concerned,  financed,  man- 
aged, or  controlled  by  private  citizens,  and  the  control 
provisions  constitute  nothing  else  but  foreign  expert  sup- 
ervision or  management  to  secure  adequate  profits.     That 


P!19P"lll!ill! 


■Mf 


X  INTRODUCTION 

is  to  say:  the  provisions  confer  legally  upon  the  foreigner 
no  rights  to  political  control. 

Secondly,  that  the  "  sphere  of  interest  "  policy  and  the 
agreements  referring  thereto  do  likewise  not  confer  upon 
the  prixileged  power  any  rights  to  political  control.  For 
China  had  not  the  slightest  intention  of  selling  its  sov- 
ereign rights  within  said  spheres. 

Thirdly,  that  the  several  control  provisions  vary  con- 
siderably as  to  character  and  degree  since  they  reflect  the 
tendencies  of  the  Far  Eastern  policies  of  foreign  powers 
which  either  represent  the  results  of  economic  pressure 
or  serve  as  incidents  in  a  larger  policy  of  national  im- 
perialism. It  is  important,  in  this  connection,  to  bear  in 
mind,  that  concessions  and  loan  contracts  have  been  ne- 
gotiated not  only  by  bankers  who  acted  as  politico-finan- 
cial agents  of  their  governments  but  also  by  diplomats 
directly.  And  it  will  be  observed  that,  whereas  it  was 
the  aim  of  the  one  power  to  insist  upon  "  adequate  con- 
trol "  for  economic  purposes  and  incidentally  to  China's 
interest,  it  was  the  aim  of  the  other  power  to  control 
railways  or  loans  for  more  or  less  political  purposes  and 
against  China's  interests.  The  control  provisions  there- 
fore oftci,  tended  to  evade,  by  practices  which  are  diffi- 
cult to  trace  definitely,  the  principle  of  equal  opportun- 
ity, and  to  undermine  China's  sovereignty.  In  other 
words,  foreign  control  in  China  is  nominally  purely  finan- 
cial, and  if  political,  it  is  an  undue  extension  of  financial 


m 


r,  .- 


,IV'- 


■ll   C-' 


•L**n,-f">L.,«  ..j^KiFM-. 


■Tjr 


l! 


I  f 


INTRODUCTION  xi 

control  by  means  of  a  peculiar  wording  and  an  arbitrary 
interpretation  of  the  control  clauses  embodied  in  the  dif- 
ferent railroad  and  loan  agreements. 

It  might  be  objected  here  that  certain  powers  have  ex- 
ercised and  still  exercise  control  upon  other  premises  than 
railroad  or  loan  agreements.  It  is  one  of  the  aims  of 
our  investigation  to  show  that  this  is  not  the  case, —  with 
the  exception  of  the  Maritime  Customs  Service  in  its 
original  form.'-*  True  enough,  several  powers  have  con- 
trolled Chinese  territory  by  military  force.  Such  con- 
trol, however,  has  always  remained  a  temporary  meas- 
ure. Control  as  we  understand  it.  is  of  a  permanent 
nature.  Neither  must  "  foreign  control  "  be  confused 
with  the  sovereign  rights  enjoyed  by  foreign  powers 
within  "  leased  territories,"  nor  with  the  rights  of  extra- 
territoriality, nor  with  foreign  administration  of  interna- 
tional settlements.  In  the  first  two  cases  China  has  ex- 
plicitly ceded  certain  sovereign  rights,  and  the  third  case 
is  practically  nothing  but  an  extension  of  the  right  of 
extraterritoriality.  Foreign  "  control "  is  exercised 
where  no  sovereign  rights  have  been  ceded.  If  we  entitle 
this  book  "  Foreign  Financial  Control  in  China "  we 
do  so  firstly  to  avoid  any  possible  confusion,  and  sec- 
ondly to  indicate  the  sources  as  well  as  the  raison  d'etre 
of  foreign  "  control." 

By  too  many  distinctions  at  the  outset,  however,  we 

•  See  Chapter  I. 


XII 


INTRODUCTION 
might  anticipate   certain   results  of   our   investigation. 
The  advantages  and  justification  of  narrowing  down  the 
vast  field  of  foreign  finance  and  foreign  policies  in  China 
to  a  more  concrete  question  of  foreign  financial  control 
will,  we  trust,  become  clearer  when  the  proceedings  and 
problems  which  have  been  touched  upon  are  analyzed  and 
narrated  in  detail.     We  shall  consider  these  by  treating 
each  foreign  power  individually ,  although  such  treatment 
may  involve  repetition  in  certain  particulars,  seeing  that 
the  several  policies  are  occa'-ionally  closely  connected.     In 
order  to  understand  fully  the  characte  •  and  degree  of  for- 
eign control  and  the  policies  and  operating  causes  under- 
lying it,  we  shall  have  to  give  a  comprehensive  knowledge 
of  past  and  existing  affairs,  conditions,  and  problems. 
The  method  of  our  investigation  therefore  must  be  mainly 
historical.     By  considering  the  vastness  of  the  field,  the 
thesis  can  only  aim  at  a  brief  analysis  and  interpretation 
of  history,  based  upon  the  most  important  documents  and 
utterances  of  authorities  and  writers  such  as  are  enumer- 
ated in  the  Bibliography.     Many  important  events  which 
have  no  direct  bearing  upon  the  subject  will  have  to  be 
left  unmentioned.     Likewise  will  m?Jiy  of  the  numerous 
railways  and  loans,  either  contracted  or  projected,  have 
to  be  left  undiscussed.     For  our  purposes  it  will  be  suf- 
ficient to  consider  only  the  more  important  contracts  and 
agreements. 

The  main  investigation  is  to  be  preceded  by  a  general 


:■  ■.i.,*'7?iTSL..,.t~r': 


^Lsaifcr-^^' -:,'.**-■•".. 


INTRODUCTION  xiii 

historical  introduction,  which  makes  no  claim  to  scientific 
value  whatsoever.  In  this  chapter  we  merely  intend  to 
set  the  stage,  so  to  speak.  The  arrangement  of  the  chap- 
ters which  then  follow  will  not  be  strictly  chronological 
but  rather  chronological,  subject  to  geographical  and  his- 
torical conditions.  A  separate  chapter  is  to  be  devoted  to 
international  control,  while  in  the  conclusion  some  reflec- 
tions will  be  made.  A  word  has  to  be  said  about  the 
spelling  of  Chinese  names.  The  writer  has  not  adopted 
a  r  liform  system,  but  has  quoted  names  as  he  found 
them  printed.  The  inconsistency  in  spelling  them  is  due 
to  the  fact  that  each  author  spells  Chinese  names  as  he 
pleases.  The  majority  of  these  conform  to  Giles'  system 
or  to  common  usage. 

In  concluding  our  introductory  remarks  we  venture  to 
belie\e  that  the  subject  demands  the  treatment  which  we 
Iiave  outlined,  and  that  it  will  be  found  both  logical  and 
convenient. 


■STP»js>  -^  '•JciTrjiS'irTB-eaar'^^irT-ea^r 


.:!»in^^^ 


«Br«ft^»'  Tissr  "na  ^B«Kr 


FOREIGN  FINANCIAL  CONTROL 
IN  CHINA 


CHAPTER  I 

FOREIGN    RELATIONS    WITH    CHINA    BEFORE    1895 

China's  recent  and  present  day  international  relations 
will  be  better  understood  on  the  basis  of  a  knowledge  of 
the  development  of  these  relations  during  the  nineteenth 
century.  Of  the  literature  available  on  this  period  ^  we 
have  principally  followed  the  two  admirable  accounts  of 
Sargent,  "  Anglo-Chinese  Commerce  and  Diplomacy," 
and  Morse,  "  The  International  Relations  of  the  Chinese 
Empire  " ;  and  since  we  can  dwell  upon  the  nineteenth 
century  previot  to  1895  only  in  an  introductory  way,  we 
shall  content  ourselves  with  a  brief  summary  of  the  two 
books,  supported  by  references  to  oiTicial  documents  and 
by  a  few  other  quotations. 

China  has  been  opened  by  England  to  intercourse  with 
the  modern  world.  The  early  history  of  British  rela- 
tions with  China  is  to  all  practical  purposes  the  history  of 
the  East  India  Company,  which  made  the  project  of 
opening  up  a  trade  with  China  an  integral  part  of  her 

'  See  Bitiliography.  Section  VI, 


2        FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

policy.     The  great  bulk  of  the  capital  required  for  the 
trade  w  ith  the  East  wr'  s  invested  in  ships  and  goods  and 
in  a  few  trading  stations  in  fixed  establishments  abroad. 
The  Company's  station  in  China  was  the  "  factory  "  at 
Canton  where  she  enjoyed  a  monopoly  granted  to  her  by 
Great  Britain  and  special  privileges  obtained  from  China. 
This  twofold  advantage  enabled  the  Company  to  main- 
tain her  commercial  predominance  of  the  Chinese  trade 
intact  throughout  the  various  vicissitudes  of  its  fortunes 
and  in  spite  of  the  modifications  introduced  at  successive 
intervals  of  the  charter.     The  excellent  responsible  or- 
ganization gave  her  the  further  advantage  of  stability  in 
dealing  with  the  Hong  merchants  and  Chinese  officials. 
The  latter  in  their  intercourse  with  foreigners  concerned 
themselves  only  with  two  points:  the  revenue  and  taxes 
imposed  arbitrarily  to  be  collected,  and  the  orderly  be- 
havior of  the  traders.     As  intermediary  in  all  things  be- 
tween the  Chinese  officials  and  the  foreigners  they  in- 
stituted the  Hong,  which  was  a  body  of  merchants  num- 
bering from  two  to  eleven.     The  Hong  was  responsible 
to  the  government  for  the  good  behavior  of  the  foreign- 
ers, and  for  the  customs  duties  on  the  whole  trade,  in- 
cluding that  of  outside  or  unprivileged  merchants.    The 
responsibility  of  the  Hong  merchants  was  more  than 
nominal.     No  foreign  ship  was  allowed  to  trade  until 
one  of  their  body  had  become  security  for  the  good  be- 
havior of  the  crew.     Those  strict  regulations  served  the 


-M'^:^^: 


■■■i^.*; 


'-f^^i- 


HISTORICAL  INTRODUCTION  3 

purpose  of  restricting  the  energetic  foreigner  to  only  such 
intercourse  as  could  be  carried  on  under  official  super- 
vision. The  monopoly  system  of  the  Hong  was  emi- 
nently calculated  to  attain  this  end.  The  functions  of 
the  Hong  were  thus  diplomatic  or  political  as  well  as 
commercial.  In  the  former  capacity  they  acted  as  a 
convenient  harrier  between  the  degraded  "  barbarian  " 
and  official  pride ;  in  the  latter  they  were  useful  as  a  fairly 
safe  and  rej^ular  means  of  filling  official  coffers. 

In  their  dealings  with  the  Hong  and  the  officials,  the 
Company,  as  the  only  representative  foreign  body,  was 
compelled  by  its  traditions  to  champion  the  cause  of  for- 
eigners in  general  and  it  was  only  at  the  close  of  the 
eighteenth  century  that  the  British  Government  began 
to  take  official  intercourse  in  its  own  hands.     This  first 
step  was  the  embassy  of  Lord  Macartney,  sent  out  both 
on  Ijehalf  nf  the  East  India  Company,  and  in  order  to  im- 
prove the  general  relations  between  the  two  nations.     It 
was  pointed  out  to  Macartney  that,  though  the  English 
were  more  numerous  than  other  foreigners  at  Cantor 
they  had  hitherto  had  no  official  communication  with  the 
Chinese  Government,  and  that  it  was  the  duty  of  the 
Sovereign  to  take  up  the  matter  and  defend  the  interests 
of  his  subjects.     Here  is  the  beginning  of  a  trouble  which 
required  a  century  for  its  settlement.     It  was  thought  that 
the  local  rather  than  the  Imperial  officials  were  respon- 
sible for  the  vexatious  restrictions  on  intercourse  with 


T^ 


4        FOREIGX  FIX ANTIAL  CONTROL  IX  CHINA 

foreigners,  and  subsequent  diplomatic  history  is  largely 
concerned  with  attempts  to  establish  direct  relations  with, 
and  wring  concessions  from,  the  Chinese  Government. 
The  main  questions  which  were  destined  to  l)e  fought  out 
in  the  nineteenth  century  were  the  legal  control  over  for- 
eigners and  the  conditions  under  which  commercial  inter- 
course was  to  be  allowed. 

With  the  beginning  of  the  nineteenth  century,  this 
intercourse  had  become  more  and  more  difficult.  The 
number  of  foreigners  resorting  annually  to  Canton  had 
greatly  increased;  disturbances  were  frequent,  the  anti- 
foreign  feeling  l)ecame  more  clearly  marked,  and  there 
was  undoubtedly,  on  the  part  of  the  Chinese,  a  distinct 
intention  to  restrict  as  far  as  possible  the  existing  privi- 
leges of  foreigners.  With  the  appearance  of  numerous 
private  traders  the  commercial  importance  of  the  East 
India  Company  began  to  decline  and  the  profits  which  so 
far  had  been  satisfactory  began  to  diminish.  In  view  of 
these  commercial  and  political  difficulties  and  of  the  grow- 
ing hostility  of  the  Chinese,  the  position  of  the  Company 
was  becoming  critical.  A  final  attempt  to  improve  her 
relations  with  China  by  invoking  the  aid  of  the  State 
and  sending  out  the  embassy  of  Lord  Amherst  in  1816 
with  the  hope  that  the  establishment  of  direct  relations 
between  the  two  governments  might  lead  to  better  trade 
conditions  generally,  also  proved  a  failure.  In  conse- 
quence of  all  this,  the  monopoly  of  the  Company  was 


HISTORICAL  IXTRODUCTION  5 

abolished  in  1833,  owing  especially  to  a  large  force  be- 
hind Parliament,  both  of  traders  and  theorists,  who  advo- 
cated open  trade  on  various  grounds. 

Simultaneously  with  the  abolishment  of  the  monopoly, 
other  orders  in  Council  provided  regulations  for  future 
relations. 2  Three  "  superintendents "  were  contem- 
plated to  present  British  authority.  The  orders  also  give 
power  to  the  Crown  to  create  a  Court  of  Justice  with 
criminal  and  admiralty  jurisdiction  at  Canton  and  to  ap- 
point one  of  the  superintendents  to  be  the  officer  to  hold 
such  a  court.  liere  we  have  the  formal  opening  of 
British  relations  with  China.  The  instructions  by  Lord 
Palmerston  to  Lord  Napier  and  his  colleagues,  as  the 
first  superintendents,  throw  considerable  light  on  the  ideas 
and  policy  of  the  Home  Government.''  The  superin- 
tendents were  enjoined  to  watch  over  trade  generally  and 
to  adjust  disputes  betwe  ..1  British  subjects  and  Chinese 
or  foreigners.  In  doing  so  they  had  to  avoid  irritating 
Chinese  officials  and  above  all  impress  on  British  subjects 
the  duty  of  conforming  to  the  laws  and  usages  of  the 
Chinese  Empire.  Lord  Napier  was  directed  to  ascertain 
how  far  it  might  be  possible  to  extend  trade  to  other 
parts  of  China  and  to  seek  for  the  best  means  of  estab- 
lishing direct  relations  v/ith  China.     There  is  evident  in 

-  See  "  Additional  Papers  Relating  to  China,"  1840,  Vol.  XXXVI 
^  See  "  Correspondence   Relating  to   China,"   1840,   Vol    XXXVI 
No.  2. 


A  It:".  1    m^ 


'^fWgWWHPi- -I'A,-    .Biyu.  ,-"■-.*-» 


6        FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

these  instructions  an  attempt  to  give  effect  to  the  aspira- 
tions of  the  British  mercantile  community  towards  a 
wider  trade  based  on  more  secure  conditions  than  the 
custom  of  the  Company. 

The  Chinese  were  well  aware  of  the  radical  difference 
between  these  new  officials  and  their  predecessors,  and 
they  did  all  in  their  power  to  counteract  the  British  policy. 
Thus  Napier's  mission  was  unsatisfactory.  It  then  be- 
came clear  that  nothing  had  been  gained  by  the  removal 
of  the  East  India  Company ;  on  the  contrary  the  Chinese 
were  attempting  further  restrictions  and  continued  to 
refuse  acknowledgment  of  the  Government  emissaries. 
However,  on  February  2nd,  1837,  the  Chinese  policy 
underwent  a  little  change,  when  an  Imperial  Edict  gave 
the  required  permission  for  admittance  to  Canton  tc 
Superintendent  Elliott  as  comptroller,  who  after  months 
of  negotiations  was  successful  in  really  establishing  his 
oflficial  position  after  having  boldly  informed  the  viceroy 
of  his  appointment  to  the  station  of  the  "  Chief  English 
authority  in  China."  *  His  admission  marks  a  new 
chapter  in  the  history  of  English  commercial  relations 
with  China.  The  English  abandoned  the  quiescent  policy 
of  the  earlier  times  and  showed  determination.  The 
first  result  of  the  new  policy  was  the  Opium  War,  during 
which  the  British  took  permanent  possession  of  Hong- 

«  See  "  Correspondence  Relating  to  Chin.i,"    1840,  Vol.  XXXVI, 
pages  14J  ff. 


HISTORICAL  INTRODUCTION  ^ 

kong.     The  war  was  concluded  by  the  treaty  of  Nanking 
of  August  29t..    .  .42.* 

Its  enactments  are  simple  in  the  extreme  —  they  are: 

1.  The  conclusion  of  a  lasting  peace  between  China  and 
Great  Britain. 

2.  The  payment  of  an  indemnity  of  $21,000,000  by 
China  to  England:  $3,000,000  to  settle  Hong  debts,  $12,- 
000,000  to  cover  expenses,  and  $6,000,000  as  opium  com- 
pensation. 

3.  The  opening  of  Amoy,  Canton,  Fuchow,  Ningpo, 
and  Shanghai  to  British  trade. 

4.  The  cession  of  the  island  of  Hongkong  to  England. 

5.  The  provision  for  free  transit  of  goods  after  pay- 
ment of  the  tariff  and  a  fixed  transit  duty. 

Opium  was  the  immediate  cause  of  the  war.  The 
Chinese  tried  to  stop  op.  am  smuggling,  which  was 
strongly  supported  by  the  Indian  Government.  India 
was  profiting  enormously  by  the  trade  and  did  not  wish 
to  discontinue  it.  When  the  Chinese  stopped  it  they  put 
themselves  in  the  wrong.  Yet  opium  was  not  the  prin- 
cipal reason  for  hostilities.  A  contemporary  conception 
of  the  significance  of  the  Opium  War  is  given  by  John 
Quincy  Adams  in  an  address  before  the  Massachusetts 
Historical  Society,  November  22nd.  1841,  on  the  subject 
of  "  The  War  between  England  and  China." 

"  See  \V.  F.  Mayers,  "  Treaties  Between  the  Empire  of  China  and 
Foreign  Powers,"  page  i. 


^■iii'A'  V, 


'.■:m,m 


-a2t^ 


8        FORI-IGN  FIXAXCIAL  CONTROL  IN'  CHINA 

"  The  justice  of  the  cause  between  the  two  parties, — 
which  has  the  righteous  cause  ?     You  have  perhaps  been 
surprised  to  hear  me  answer,  Britain.     Britain  has  the 
righteous  cause.     But  to  prove  it,  I  have  been  obliged  to 
show  that  the  opium  question  is  not  the  cai'se  of  the  war. 
My  demonstration  is  not  yet  complete.     The  cause  of  the 
war  is  the  kowtow!  — the  arrogant  and  insupportable 
pretension  of  China  that  she  will  hold  commercial  inter- 
course with  the  rest  of  mankind,  not  upon  terms  of  equal 
reciprocity,  but  upon  the  insulting  and  degrading  forms  of 
lord  and  vassal."  "     "  In  fact  the  direct  cause  of  the  war 
was  the  growing  sense  of  the  need  for  belter  protection 
to  life  and  property,  though  behind  this  was  the  ground 
cause  of  the  need  for  bcUer  relations  generally."  ^     The 
Treaty  of  Nanking,  then,  intended  to  settle  the  disputes 
between  the  mandarins  and  the  British  traders  and  it  was 
to  be  the  charter  of  commercial  rights  in  China,  acknowl- 
edging for  the  first  time  in  history,  the  existence  of  a 
Western  Power  on  an  equality  with  the  Celestial  Empire: 
For  Article  I  stipulates  that  the  respective  subjects  "  shall 
enjoy  full  security  and  protection  for  their  persons  and 
property  within  the  dominions  of  the  other,"  while  ac- 
cording to   \rticle  II  Great  Britain  "  will  appoint  Super- 

8  Boston  Evening  Trnnscript,  Wednesday,  Nov.  24,  1841,  quoting 
the  transactions  of  the  Massachusetts  Historical  Society  of  Nov 
22,  1841. 

^  See  H.  B.  Morse,  "  The  Trade  and  Administration  of  China  " 
page  36. 


HISTORICAL  INTRODUCTION 


in'.endents  or  Consular  Oflficers,  to  reside  at  each  of  the 
jbove-natned  cities  or  tovvn^,  to  l)e  the  medium  of  com- 
munication Ix'tween  the  Chinese  authorities  and  the 
merchants." 

But  when  England  accepted  the  treaty  in  final  settle- 
.— nt  of  the  annoyances  which  had  led  to  the  war  of 
1839,  she  had  reckoned  without  her  host.  Owing  to  the 
fact  that  the  Chinese  were  not  permitted  by  a  Christian 
nation  to  abolish  the  infamous  opium  traftic  because  it 
was  a  very  lucrative  one,  and  owing  to  the  humiliation 
of  their  defeat  and  of  the  Treaty  of  Nanking,  which  has 
"  inflicted  a  deep  wound  in  the  pride,  but  by  no  means 
altered  the  policy  of  the  Chinese  Government,"  "  and  last, 
but  not  least,  owing  to  the  conservative  and  even  stub- 
lx)rn  disinclination  on  the  side  of  the  Chinese  to  treat 
other  nations  on  terms  of  equality,  relations  between 
China  and  other  Powers,  and  especially  with  Great  Brit- 
ain, continued  unstable.  The  Chinese  view  of  the  treaty 
was  in  marked  contrast  to  its  terms.  China  had  signed 
it  reluctantly  and  merely  to  stop  the  incursions  of  the 
British  in  her  realms,  and,  having  obtained  her  aim,  she 
made  no  attempt  to  abide  by  its  provisions.  Thus  the 
period  following  the  Treaty  was  filled  with  further  dis- 
turbances and  difliculties  in  the  relations,  the  principal 
complaint  being  that  charges  still   were  suddenly  and 

*  Sec  Alexis  Krausse,  "  The  Far  East,"  page  ,^6. 


M^jSHfjiiii^s.«ies^^ 


lO      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

arbitrarily  imposed  by  the  provincial  officials  in  spite  of 
the  treaty  stipulations. 

But  on  the  other  hand,  the  reports  and  opinions  of 
consuls  drawn  up  for  the  benefit  of  Lord  Elgin  show 
plainly  that  many  elements  of  disturbance  were  also  to  l)e 
found  within  the  European  settlements,  and  that  in  the 
matter  of  observance  of  treaties  the  Chinese  were  far 
from  being  the  only  offenders." 

To  quote  Sargent  '" :  "  Foreign  merchants,  in  direct 
custom-house  relations  with  Chinese  authorities,  all  more 
or  less  venal  and  corrupt,  launched  into  a  wholesale  sys- 
tem of  smuggling  and  fraudulent  devices  for  the  evasion 
of  duties.  Contempt  for  all  Chinese  authority,  and  dis- 
regard of  inherent  rights,  habitual  infraction  of  treaty 
stipulations,  licence  and  violence  wherever  the  ofTscum  of 
the  European  nations  found  access,  and  peaceable  people 
to  plunder  — such  were  the  first-fruits  of  this  important 
concession;  and  time  only  served  to  increase  their 
growth." 

Conditions  soon  pointed  to  another  armed  interference 
in  which  the  French  joined  hands  with  the  English, 
while  Russia  and  the  United  States  abstained  strictly 
from  any  hostile  steps,  unng  moral  suasion  alone.  The  re- 
sult of  the  interference  was  the  Treaty  of  Tientsin,  which 

Chinr^lTfnTZ  !:.t,*'-"^.^^'^-'""'  °^  ^-'«''""^   special  mission   to 
Lh  na,  .857  to  1850.     China,"  1859,  Vol.  XXXIII.  No    i 

'".Sargent,  op.  cit.,  page   103. 


MJ. . •.•*--'*'>• 


-^mt^&t^i^-M 


i  1:^. 


HISTORICAL  INTRODUCTION 


II 


was  signed  with  China  on  the  26th  of  June,  1858,  by  Lord 
Elgin  in  connection  with  representatives  of  France.^^ 
This  treaty  strengthrv,  uist  previously  arranged  at  Nan- 
king, and  supplie*  vneral  onii.  sions  in  the  former.  It 
serves  as  the  ult.nafe  basi'i  i  f  foreign  relations  with 
China  and  there foi  j  mcilL-  n  close  examination.  The 
most  important  novelty  is  put  in  the  forefront  of  the  doc- 
ument. Article  3  provides  for  the  sending  of  an  ambas- 
sador to  the  court  of  Peking  with  all  the  usual  privileges 
of  such  ministers  and  the  dispatch  of  a  similar  represen- 
tative from  China  to  London.  He  may  come  and  go  at 
pleasure;  his  letters  are  to  be  inviolable;  he  may  com- 
municate with  a  high  official  on  terms  of  equality,  and 
shall  not  be  called  on  to  perform  "  any  ceremony  derog- 
atory to  him  as  representing  the  Sovereign  of  an  inde- 
pendent nation."  By  this  clause,  China  is  compelled, 
once  and  for  all,  to  surrender  her  formal  claim  of  supe- 
riority over  western  nations,  which  was  one  of  the  most 
cherished  principles  of  the  traditional  policy  of  the  Em- 
pire. Next  in  importance  to  the  position  of  the  British 
representative  comes  the  fuller  recognition  of  the  prin- 
ciple of  extraterritoriality.  Referring  to  th.  latter 
Morse  writes,"  "  English  ,  .  .  were  not  molested  so  long 
as  they  were  law-abiding,  but  law-abiding  in  the  sense  of 
the  law  of  China.     It  was  irksome  to  them  to  have  no 

11  See  Mayers  op.  cit.,  page  11. 

»2  See  Morse,  "  Trade  and  Administration  of  China,"  page  17c, 


PW!^ 


■»w 


12      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

lawyer  to  instruct  them  in  the  law  of  the  land,  to  have  no 
fixed  and  certain  law  to  appeal  to,  to  be  doubtful  of  the 
application  of  the  law  to  any  particular  case,  and  to  have 
no  doubt  whatever  on  the  course  likely  to  be  followed  by 
the  administrators  of  the  law."'     While  the  Treaty  of 
Nanking  made  consuls  the  "  medium  of  communication 
between   Chinese  authorities  and  the   merchants,"  and 
while  the  supplementary  treaty  of  Hoomunchae  "  merely 
contained  provisions  for  extradition,  and  regulations  re- 
garding the  punishment  of  English  crminals,  Article  XV 
of  the  Treaty  of  Tientsin  establishes  the  principle  of  ex- 
traterritoriality as  far  as  British  subjects  only  are  con- 
cerned :     "  All  questions  in  regard  to  rights,  whether  of 
property  or  persons,  arising  between  British  subjects, 
shall  be  subject  to  the  jurisdiction  of  the  British  authori- 
ties."    The   principle   of    extraterritoriality    was   more 
clearly  expressed  and  expanded  in  the  Chefoo  Convention 
of  1876,^*  between  Great  Britain  and  China,  providing 
for  mixed  jurisdiction  between  English  and  Chinese,  and 
again  in  the  American  Supplemental  Treaty  of  Peking 
of  i88o.'»     In  the  latter,  Article  IV  reads  as  follows :  — 
"  When  controversies  arise  in  the  Chinese  Empire  be- 
tween citizens  of  the  United  States  and  subjects  of  His 
Imperial  Majesty,  which  need  to  be  examined  and  de- 

'3  See  Mayers,  op.  cit.,  page  5. 
1*  See  Mayers,  op,  cit.,  page  44. 

"  See  Malloy,  "  Treaties  Between  U.  S.  and  Other  Powers  "  Vol 
I,  pages  239  ff. 


HISTORICAL  INTRODUCTION 


13 


cided  by  th  public  officers  of  the  two  nations,  it  is  agreed 
between  the  Governments  of  the  United  States  and 
China  that  such  cases  shall  be  tried  by  the  proper  official 
of  the  nationalit;,  of  the  defendant.  The  properly 
authorized  official  of  the  plaintiff's  nationality  shall  be 
freely  permitted  to  attend  the  trial,  and  shall  be  treated 
with  the  courtesy  due  to  his  position.  He  shall  be 
granted  all  proper  facilities  for  watching  the  proceedings 
in  the  interests  of  justice.  If  he  so  desires,  he  shall  have 
the  right  to  present,  to  examine,  and  to  cross-examine 
witnesses.  If  he  is  dissatisfied  with  the  proceedings  he 
shall  be  permitted  to  protest  against  them  in  detail.  The 
law  administered  will  be  the  law  of  the  nationality  of  the 
officer  trying  the  case." 

Articles  IX-XI  of  the  Treaty  of  Tientsin  contain  the 
new  concessions.  British  subjects  may  travel  for  pleas- 
ure or  trade  to  all  parts  of  the  interior,  under  pass  is 
issued  by  their  Consuls,  and  countersigned  by  the  k.cal 
authorities.  Newchwang,  Tangchow,  Taiwan,  Swatow, 
and  Kiungchow  are  opened  as  new  treaty  ports,  where 
foreigners  are  privileged  to  establish  consulates  and  for- 
eign merchants  are  permitted  to  live  and  trade.  The 
new  area  thus  provided  for  British  enterprise  was  greatly 
extended  by  tlie  opening  of  the  Yangtsze  to  British 
merchant  ships. 

Finally  Article  XXVIII  deals  with  the  vexed  question 
of  inland  transit  duties.     At  all  the  treaty  ports  there  are 


I— HfcajW!    I      iiiimiiBfci— ■■ 


iM^ 


ri^iSi 


'W- 


14     F()Ri:i(;\  FiNAxciAr.  control  in  china 

levied  dues  and  duties  on  the  trade  according  to  a  tariff 
settled  by  both  parties.     Goods  were  exempted  from  all 
further  taxation  on  movement  by  one  initial  payment, 
except  that  the  goods  <;o  "  inland  "  to  a  place  which  is 
not  a  treaty  port,  where  the  bale  is  liable  to  the  taxa- 
tion which  is  levied  in  China  on  all  movement  of  com- 
modities not  exempted  by  "  special  privilege.''     This  is 
the  one  reason  underlying  the  constant  demand  for  the 
opening  of  new  treaty  ports,  with  all  the  expense  for 
administrative  work  imposed  on  China,  and  for  the  en- 
forcement    of     extraterritorial     rights.     This     Article 
XXVIII  does  away  with  the  arbitrar>'   imposition  by 
provincial  authorities  of  transit  duties,  so  much  com- 
plained of  by  British  merchants,  and  stipulates  a  single 
transit  charge  to  be  declared  by  the  collector  of  duties 
and  to  be  levied  at  the  first  barrier  or  at  the  landing  port. 
The  charge  is  to  be  as  near  as  possible  23^  ad  valorem. 
Hereafter  goods  are  exempt    from  all    further  inland 
charges  whatsoever. 

Between  the  signature  of  the  treaty  and  its  ratification 
there  was  again  a  period  of  armed  conflict,  illustrating 
the  reluctance  of  the  Central  Government.  The  Con- 
vention of  Peking  finally  signed  the  treaty  on  October 
24,  i860,  a  few  days  after  the  English  and  French  Allies 
had  found  it  necessary  to  give  the  Chinese  a  severe  lesson 
in  destroying  the  summer  palace. 


»  '■ 


HISTORICAL  IXTRODUCTION 


15 


Treaties  similar  to  the  British  treaty  were  immediately 
afterwards  concluded  by  all  the  important  powers. 

The  political  history  of  the  next  few  years  is  largely 
taken  up  with  the  difficulties  incidental  to  the  execution 
of  the  terms  of  the  treaties.  The  governments  standing 
behind  the  two  contesting  parties,  the  Chinese  officials  and 
the  merchants,  seemed  to  be  disposed  for  a  time  to  settle 
their  differences  by  diplomacy  rather  than  by  force.  The 
main  step  in  that  direction  taken  by  China  was  the  foun- 
dation of  th^  Tsungli  Yamen,  or  Board  of  Foreign 
Affairs,  a  product  of  the  moderate  party  of  Prince  Kung. 
Having  thus  to  deal  with  a  responsible  central  body  the 
English  decided  not  to  tolerate  local  pressure  any  longer 
and  tried  to  induce  the  Chinese  to  adopt  western  ideas  as 
to  the  subordination  of  local  to  central  authority.  The 
strengthening  of  central  authority  as  against  provincial 
authority  would  have  been  to  China's  own  interests,  since 
local  officials  were  not  willing  to  surrender  revenue  col- 
lected for  the  benefit  of  the  Chinese  Government,  which 
was  in  need  of  resources  to  cope  with  the  Taiping  rebel- 
lion. In  this  connection  the  English  helped  China  not 
only  to  strengthen  centralization,  but  they  also  sent  mili- 
tary aid  to  quell  the  Taiping  rising,  which  at  one  moment 
threatened  to  overwhelm  the  whole  country  and  to  depose 
the  Manchu  dynasty.  Thus  the  British  Government  com- 
mitted itself  definitely  by  this  assistance  rendered  to  the 


1^^^ 


*M  ■  :  'iixj 


^M^^  MtmJtmnr-SMvM.i 


l6      FOREIGxX  FIXANTIAL  CONTROL  I\  CHINA 

upholding  of  the  dynasty  and  to  the  protection  of  the 
Empire's  integrity. 

In  spite  of  all  this  friendly  assistance,  however,  the 
attitude  of  the  Chinese  underwent  no  material  change. 
Internal  disorder  and  corruption  seriously  affected  the 
e.xecution  of  the  treaties;  the  transit  system  continued  to 
be  totally  inefficient  and  unsatisfactory.     The  internal 
administration  of  China  was  hopelessly  corrupt ;  military 
and  civil  organization  were  in  confusion;  the  Empire, 
without  rail  or  telegraph,  with  its  capital  in  the  far  north, 
was  too  vast  for  effective  centralized  government.     Reor- 
ganization, indeed,  was  greatly  needed  everywhere.     The 
only  thing  accomplished  in  that  line  was  the  reforma- 
tion of  the  customs  system  on  western  lines,  when  native 
talents  and  methods  were  inadequate  for  dealing  with 
the  complicated  conditions  introduced  by  the  Treaty  of 
Tientsin. 

The  formation  of  the  "foreign  customs,"  says 
Morse, »«  "  was  laid  in  the  necessities  of  the  Chinese  Gov- 
ernment and  not  in  any  demand  by  the  foreign  merchant 
that  an  improved  revenue  service  should  be  provided  for 
them."  The  system  grew  out  of  the  voluntary  collection 
of  customs  established  in  Shanghai  during  the  Taiping  re- 
bellion. It  was  ever  more  enlarged  and  Rule  lo  of  the 
Agreement  of  the  Tariff  Commission  of  1858  laid  the 
foundation  for  the  appointment  of  a  foreign  Inspector- 
"  See  Morse's  "  Trade  and  Administration,"  page  366. 


HISTORICAL  INTRODUCTION 


17 


ate.'^  In  1863  Mr. —  later  Sir — Robert  Hart  was  ap- 
pointed Inspector  General  and  brought  the  system  to  its 
highest  possible  efficiency,  thus  benefiting  the  Chinese  as 
well  as  foreign  creditors :  for  the  Chinese  Maritime  Cus- 
toms were  to  serve  as  securities  for  loans,  to  which  we 
shall  have  occasion  to  refer  later. 

All  further  attempts  ^n  the  European  side  at  reorgan- 
ization and  the  attempts  1  carry  out  the  different  treaty 
stipulations  and  the  conventions  for  treaty  revisions 
proved  to  be  without  any  result.  The  Chinese  were  not 
only  not  prepared  to  make  any  further  concessions  but 
they  also  desired  a  great  deal  to  be  altered.  The  car- 
dinal points  of  Chinese  policy  were  brought  to  light  at 
the  Convention  of  1869.'^  These  were  —  the  total  pro- 
hibition of  opium,  the  restriction  of  missionaries  from 
inland  residence,  and  the  abolition  of  the  principle  of  ex- 
traterritoriality. They  amounted  to  the  recovery  of  the 
greater  part  of  that  liberty  which  had  been  wrested  from 
the  Court  of  Peking  in  the  various  treaties.  Chinese 
opposition  was  reen forced  by  the  extravagant  demands 
of  the  British  merchants.  The  latter  insisted  upon  the 
most  sweeping  changes,  but  were  not  disposed  to  concede 
anything.  Indeed,  their  presence  in  China  was  not  based 
on  the  desire  to  further  the  welfare  of  the  Chinese  but 
on  their  own  benefit.     And  that  in  the  treatment  of  China 

^^  See  Mayers,  op.  cit.,  page  31. 
^*  See  Mayers,  op.  cit,  page  2>7- 


^^^? 


TJT55f? 


~Sk 


■•^r^ 


Umr 


mAm 


t8      FORFJdX  FIXANCIAL  CONTROL  IN  CHINA 

by  tlie  foreigner  much  remained  to  be  desired  was  amply 
illustrated  by  the  plea  of  Burlingame  in  his  famous  mis- 
sion on  k-half  of  the  Chinese  Government. 

The  demands  of  the  merchants  were  not  only  prompted 
by  an  unsatisfactory  state  of  affairs  in  China,  but  they 
also  reflected  unsatisfactory  trade  results.     For  a  quarter 
of  a  century  after  the  passing  of  the  East  India  Company, 
the  British  had  cherished  the  idea  that  the  Chinese  Em- 
pire, once  successfully  opened  to  trade,  would  offer  a 
vast   field   of   lucrative  opportunities    for   British   mer- 
chants.    The  several  wars  and  following  treaties  were 
deliberately  undertaken  for  the  development  and  protec- 
tion of  that  field.     Yet  the  renewed  activities  of  trade 
as  shown  after  the  treaties  of  Nanking  and  Tientsin,  and 
the  extension  of  the  markets  by  the  addition  of  new 
treaty  ports  proved  to  be  of  little  advantage  to  the  for- 
eign mercantile  community  in  China.     The  possibilities 
of  the  trade  and  the  opening  of  the  Suez  Canal  had 
attracted  large  numbers  of  traders  with  small  capital  or 
credit,  while  the  more  responsible  merchant,  i-    anticipa- 
tion of  lower  profits  on  each  transaction,  was  naturally 
disposed  to  enlarge  the  scope  of  his  operations  by  way 
of  compensation.     The  result  was  an  artificial  expansion 
of  business,  greatly  to  the  detriment  of  the  merchants, 
but  to  the  advantage  perhaps  of  the  British  consumer 
and   manufacturer  and  certainly  greatly   to  the  profit 
of  the  Chinese  producer  and  merchant.     These  exploited 


-i?.'-.rSi'*''"V''*<ffiiki  '  .-. ,  -E**:! 


<tfu 


HISTORICAL  INTRODUCTION 


19 


to  the  full  the  competition  among  foreign  buyers,  who 
were  helpless  in  the  hands  of  the  native  dealer,  since 
the  latter  was  enabled  by  his  excellent  gild  organization 
to  maintain  a  strong  control  over  the  local  markets  and 
to  keep  up  prices. i"  The  control  of  the  whole  trade  was 
fast  getting  into  the  hands  of  natives,  last  not  least, 
tlirough  the  foreigner's  ignorance  of  language,  while  the 
foreigner  began  to  decline  to  the  position  of  a  mere 
agent,  and  profits  and  influence  dwindled  together.  The 
Chinese  evidently  were  already  discovering  that  there 
are  other  means  than  riot  and  open  opposition  for  the 
ousting  of  the  foreigner.—  means  that  cannot  be  touched 
Iiy  force  or  treaty. 

The  increase  of  trade,  furthermore,  depended  on  the 
expansion  of  the  area  and  population  open  to  British 
trade  rather  than  on  the  increased  use  of  English  goods. 
"  If  we  consider  the  vastness  of  the  native  population 
within  reach  of  our  goods  at  the  opening  of  the  trade, 
we  are  forced  to  the  conclusion  that  we  were  no  nearer 
capturing  the  native  markets,  in  the  sense  of  supplying 
the  everyday  needs  of  the  masses,  in  1884  than  in  1834. 
.  .  .  The  economic  self-sufficiency  of  China  was  perhaps 
the  most  formidable  barrier  which  we  had  as  yet  encoun- 
tered in  our  career  of  industrial  and  commercial  expan- 


"  20 


sion. 

"  See  Schumacher,  "  VVehwirtschaftliche  Stuclien,"  pages  430  ff. 
in :  "  Die  Organisation  des  Fremdhandcls  in  China." 
-»  Sargeant,  op.  cit.,  pages  224,  225. 


20      FORKIGN  FINANCIAL  CONTROL  IN  CHINA 

Looking  back  over  the  whole  history  of  foreign  rela- 
tions with  China  since  the  abolition  of  the  East  India 
Company's    trading   monopoly,    a    few    marked    results 
clearly  stand  ou^ :     The  most  satisfactory  result  was  the 
establishment  of  foreign  financial  control  over  the  mari- 
time customs  service,  which,  however,  should  prove  of 
greatest  value  and  service  at  a  later  period  and  which 
will  be  duly  referred  to  at  the  proper  occasion.     Further- 
more, the  principle  of  extraterritoriality  w^as  introduced 
in  China.     Though  it  had  proved  absolutely  necessary 
for  the  protection  of  the  foreigner,  it  put  a  stigma  of 
inferiority  on  the  Chinese  which  is  evident  in  all  further 
dealings  between  China  and  the  foreign  powers.     It  re- 
versed the  pc  ■♦ion  of  China  which  formerly  was  one  of 
overbearan^e       J  contempt  for  the  "barbarian."     But 
treaties  could  neither  alter  national  feelings  and  long- 
established  customs,  nor  could  they  strengthen  the  inher- 
ent weakness  of  the  Manchu  administration  and  official 
corruption.     Truly  enough,  tolerable  conditions  for  com- 
mercial intercourse  were  established.     Nevertheless,  the 
Chinese  trade,  upon  which  great  hopes  had  been  founded, 
remained  comparatively  insignficant  and  unsatisfactory 
considering  the  sacrifices  and  risks  incurred  to  develop 
it;  while  the  experience  revealed  that  it  is  impossible  to 
create  that  trade  by  force  of  pressure  or  by  treaties. 
Indeed,  Europe  used  only  a  moderate  amount  of  pressure 
in   imposing  its   own   will   upon   the   Chinese   Empire, 


HISTORICAL  INTRODUCTION 


21 


as  Morse  in  a  summary  of  the  "  Period  of  Conflict  "  *» 
emphasizes:  "In  time  the  world.  East  and  West,  will 
recognize  that  the  West  ha-  >xercised  great  restraint  and 
shown  a  wise  moderation  in  reaping  the  fruits  of  victory, 
and  that  the  restrictions  imposed  on  Chinese  sovereignty 
were  only  those  rendered  indispensable  by  the  inefficiency 
and  corruption  of  the  mandarinate  of  the  Empire;  but 
this  was  a  lesson  for  future  years;  now.  as  the  result 
of  three  wars,  the  Chinese  learned,  and  they  accepted  as 
their  law,  that,  whereas  formerly  it  was  China  which 
dictated  the  conditions  under  which  international  rela- 
tions were  to  be  maintained,  now  it  was  the  Western 
nations  which  imposed  their  will  on  China." 

The  policy  adopted  by  the  British  Government  follow- 
ing the  Treaty  of  Tientsin  was  one  of  non-interference. 
It  was  found  advisable  to  consolidate  what  was  already 
gained,  and  for  the  future  to  trust  to  patient  negotiation 
and  moral  influence.  A  reaction  of  discouragement  had 
set  in,  which  found  its  expression  in  a  policy  of  laisser- 
faire  adopted  by  the  Home  Government  after  the  removal 
of  Lord  Palmerston  from  the  Foreign  Office.  This  pol- 
icy also  reflected  a  belief  in  China's  ability  ultimately  to 
set  her  own  house  in  order  and  a  desire  to  be  on  friendly 
terms  with  other  nations  and  to  avoid  any  causes  of  fric- 
tion. 

In  accordance  with  the   laissez-faire  and   free-trade 

''I  See  Morse,  "  International  Relations,"  page  617. 


•.  'iwi  h  -s-p-     -«p3«rr.!i5sra«*f--TS^TiimiBr»'irs;4   / 


ioa 


A         >•' ' 


4_ai 


22      FOREIGN'  F'IN'AXCIAL  (  OXTKOI.  IN  CHINA 

pr-iriples  England  was  ready,  after  having  obtained  new 
outlets  for  trade  and  other  privileges,  to  share  them  with 
other  nations.  'Ihus  her  ac(|uisition  of  trade  facilities 
was  followed  by  the  conclusion  of  similar  treaties  Ije- 
tween  China  and  other  Powers.  Britain  had  solved  the 
problem  of  the  conditions  most  favorable  to  national 
prosperity  in  her  way.  lielieving  that  open  competition 
was  the  l)cst  condition  for  ensuring  such  prosperity. 
Wherever  free-trade  existed  it  meant  British  preponder- 
ance; and  the  predominance  of  England  in  China  was 
admitted  on  all  hands.  Consequently,  Great  Britain 
did  not  attain  exclusive  privileg-^s  for  the  Ijenefit  of  her 
trade  and  .she  strove  by  means  of  the  "  most  favored 
nation  "  clause  only  to  enjoy  such  privileges  as  have  btcii 
accorded  to  other  nations  and  no  more.  And  she  also 
was  willing  to  refrain  from  the  exaction  of  further  priv- 
ileges. 

Thus  her  policy,  however,  had  to  undergo  a  moderation 
as  soon  as  other  countries  began  to  seek  special  advan- 
tages at  the  expense  of  their  competitors  and  of  China. 
I'Vench  aggrandizement  in  Tongking,  and  the  declaration 
of  a  protectorate  over  Annam  were  followed  by  th;; 
Franco-Chinese  Treaty  of  Tientsin,  in  June,  1885,  which 
seriously  afifected  British  interests  in  setting  up  differen- 
tial duties  in  favor  of  France  and  in  defiance  of  English 
treaty  rights.^- 

'•'-  See  Mayers,  op,  cli.,  page  j.jy. 


l-«  *mmiSL! 


HISTORICAL  INTRODUCTION 


23 


The  British  Government  could  not  view  without  con- 
cern the  prospect  of  differential  treatment   for   French 
goods  entering  China  by  way  of  the  land  frontier,  and 
the  danger  of  railway  concessions  leading  to  commercial 
monopoly.     I-'requent   protests  and   warnings   were  ad- 
dressed to  Peking;  and  the  Chinese  were  ready  enough 
to  give  assurances  representing  wishes,  which  thev  were 
unable  to  carry  out  in  the  face  of  France's  superior  force. 
The  only  effective  reply  to  the  French  claims  then,  it  was 
held,  was  to  be  found  in  the  grant  of  counter-conces- 
sions by  China  to  England ;  and  so  the  F:nglish  secured 
a  series  of  concessions  and  advances    >  rallel  to  those 
granted  to  France,  and  in  the  same  rtt,  .        The  agree- 
ments of   1886.   1890,   1893,   1894  and   1897"  opened 
trade  and  residence  to  British  officials  at  Yatung,  recti- 
fied  the    Burmese    frontier,   organized   overland    trade, 
opened  the  West  River  to  seaborne  trade,  VVuchau  being 
declared  a  treaty  port.     The  most  important  result  of 
English  diplomacy  was  the  passing  of  Burma,  thereto- 
fore under  Chinese  suzerainty,  under  complete  British 
rule  through  the  so-called  O'Connor  Convention  of  July 
24,  I.S86.2*     By  Article  II  China  agreed  "  that,  in  all 
matters  whatever  appertaining  to  the  authority  and  rule 
which  England  is  now  exercising  in  Burma,   England 

"  See  Mayers,  op.  cit.,  pages  251  flF.,  and  sec  also  Rockhill,  "  Trea- 
ties and  Conventions,"  Nos.  i  and  7. 
"See  "China,"  No.  5.  1886,  C  — 4861. 


f 


24      FORKltJX  FIXANXIAL  CONTROL  IN  CHINA 

shall  be  free  to  do  whatever  she  deems  fit  and  proper." 
In  1890  Sikkim  followed  the  way  of  Burma. 

But  while  the  dependencies  of  China  were  dropping 
from  her  in  the  south  and  southwest  and  while  Korea 
was  preparing  her  independence,  the  conclusion  of  the 
Chino-Japanese  W  ar  marked  the  beginning  of  a  series 
of  new  events  and  the  recognition  of  new  political  prob- 
lems  concerning  China  proper.     The  war  disclosed  the 
utter   military   weakness   of  the   Manchu   Government, 
and  several  great  Powers  were  not  slow  in  taking  ad- 
vantage of  this  fact  by  disintegrating  Chinese  territory 
and  pressing  China  for  special  and  exclusive  advantages. 
The  most  important  event  at  this  time  was  the  occupation 
of  the  Liaotung  peninsula  and  Port  Arthur  by  Russia, 
an  occupation  which  had  long  been  determined  on  and 
which  enabled  Russia  to  obtain  a  stronger  influence  over 
the  Chinese  at  Peking.     The  occupation  was  preceded  by 
the  seizure  of  Kiaochau  by  Germany,  which  had  been 
well  aware  of  Russia's  ambitions,  and  was  immediately 
followed    by    similar    actions    of    Great    Britain    and 
France. 

By  this  territorial  aggression  the  old  method  of  nego- 
tiating by  force  was  revived.  But  while  the  armed  inter- 
ference of  Great  Britain  in  former  periods  had  secured 
equal  opportunities  to  all  other  nations,  the  actions  of  the 
powers  in  the  years  1897-1898  proved  to  be  of  an  indi- 
vidual and  selfish  character.     They  disclosed  the  growth 


HISTORICAL  INTRODUCTION 


25 


of  the  new  principle  of  preferential  concessions,  develop- 
ing into  the  policy  of  "  spheres  of  interest."  Before  long 
we  find  Germany  maintaining  that  Shantung,  as  the 
hinterland  of  Kiaochau,  could  not  be  open  without  re- 
serve to  the  enterprise  of  others  than  Germans.  Almost 
at  the  same  moment,  Russia  was  announcing  that  she 
would  not  permit  the  Chinese  provinces  bordering  on  the 
Russian  frontiers  to  come  under  the  influence  of  any 
other  nation.  She  was  pressing  on  to  the  economic  as 
well  as  the  political  control  of  north  China.  While 
France  was  aiming  at  the  south,  Japan  claimed  pre- 
I  dominance  in   Fukien,   and   England   in  the   Yangtsze- 

Kiang  region. 

All  theoe  concessions  were  extorted  from  China  prac- 
tically without  any  compensation.  Stripped  of  her 
power,  China  had  to  pay  the  penalty  of  an  unsuccessful 
war,  and  was  forced  to  grant  such  privileges  which  she 
had  hitherto  steadily  refused.  The  concessions  were 
either  granted  without  excuse,  or  they  were  the  penalties 
of  acts  of  violence  on  the  part  of  the  Chinese  subjects, 
the  missionary  being  a  favorite  pretext.  But  the  pen- 
alty was  usually  out  of  all  proportion  to  the  crime,  and 
China  had  reason  for  regarding  the  policies  adopted  by 
the  European  Powers  as  an  open  attack  on  the  independ- 
ence of  the  Empire.  And  indeed  the  independence  and 
integrity  of  China  seemed  to  have  been  severely  menaced, 
for  it  is  evident  that  the  vision  of  a  "  break  up  of  China  " 


26      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

played  a  great  role  in   the  imagination  of   European 
statesmen. 

At  the  same  time  the  commercial  and  financial  world 
uas  stirred  with  splendid  visions  of  the  long-deferred 
unconditional  opening-up  of  China,  and  finance  began  to 
display  mterest  in  a  country  which  presented  unusual  eco- 
nomic attractions.     In  this  connection  it  is  necessary  to 
bear  m  mind  the  tremendous  economic  changes  which 
had  taken  place  in  Europe  towards  the  end  of  the  nine- 
teenth century.     The  immense  development  of  the  eco- 
nomic resources  of  Europe  and  the  overproduction  of 
capital  resulted  in  an  unprecedented  outflow  of  capital 
to  all  parts  of  the  world.     The  perfection  of  the  joint 
stock  company,  and  the  general  recognition  granted  to 
this  form  of  organisation,  made  it  possible  for  capital 
successfully  to  undertake   in   distant   lands   enterprises 
which  could  not  otherwise  have  been  undertaken      The 
private  speculator  and  especially  the  great  financial  inter- 
ests appear  in  China  and  behind  the  latter  is  the  whole 
diplomatic   force  of  their  respective  countries;  or  the 
governments  appear  as  the  economic  patrons  of  their 
subjects  and  promote  or  encourage  financial  enterprises 
'n  China.     Finance  takes  the  role  which  trade  so  success- 
fully had  played  in  its  connection  with  foreign  policy 
the  great  and  principal  objects  of  finance  being  railway 
enterprises  and  political  loans.     Such  were  the  economic 
torces  behind  the  "  battle  of  concessions." 


CHAPTER  II 


GREAT    BRITAIN 


3 


The  aim  of  Britain,  the  greatest  Asiatic  power,  was 
the  maintenance  of  her  economic  preponderance.     Since 
her  interests  existed  in  every  port  and  her  trade  flourished 
in  every  province,  she  was  bound  to  resent  the  attempt 
at  closing  any  portion  of  China  to  her  trade,  and  she  had 
to  oppose  any  measures  which  might  tend  t    give  undue 
advantage  to  another  power.     The  policy  of  England, 
under  the  leadership  of  Lord  Salisbury,  was  that  known 
a*  the  "  open  door  "  policy,  its  signification  being  that  the 
door  of  trade  should  be  kept  open  for  Great  Britain  in 
every  place  where  it  was  made  available  to  any  other 
country  in  China.     To  the  demands  for  an  "  open  door  " 
were  added  the  watchwords :  "  integrity  of  China  "  and 
"  equal  opportunity,"  all  of  whicli  are  constantly  reap- 
pearing in  the  newspapers,*  and  in  the  official  corre- 
spondence concerning  the  affairs  of  China."     But  the  Brit- 
sh  Government  had  to  go  beyond  the  mere  proclamation 
of  these  principles,  as  long  as  other  nations  did  not 
respect  them.     When  Germany  leased  the  territory  of 

Ic^'i?; .'"''.?"«•  ^"^°"  Times  April  6.  .898,  and  otherwise, 
bee     China,    No.  i,  1899,  Vol.  CIX. 

37 


28      FOREIGN  FINANCIAL  "CONTROL  IN  CHINA 
Kiaochau.    Russia    Port    Arthur    and    Talienwan,    and 
France  Kuangchouwan,  England  was  apparently  unable 
to  raise  effective  objections  and  resolved  to  follow  the 
example  of  the  others.     The  foreign  office  was  especially 
worried  about  Russia's  advance  in  the  north,  since  Rus- 
sia was  considered  England's  great  opponent  in  Asia. 
Lord  Salisbury  declared  that  "  the  balance  of  power  in 
the  Gulf  of  Pechili  is  materially  altered  by  the  surrender 
of  Port  Arthur  by  the  Yamen  to  Russia."  ''     The  English 
therefore  entered  into  negotiations  with  the  Yamen   /hich 
resulted  in  the  leasing  of  the  harbor  of  Weihaiwei  to 
England.     A  convention  was  signed  on  the  first  of  July, 
1898:     "  In  order  to  provide  Great  Britain  with  a  suit- 
able naval  harbor  in  North  China  and  for  the  better  pro- 
tection of  British  commerce  in  the  neighboring  seas."  * 
Of  great  significance  for  Great  Britain's  policy  is  the 
clause  in  the  first  paragraph  in  which  China  agrees  to 
lease  Weihaiwei  "  for  so  long  a  period  as  Port  Arthur 
shall  remain  in  the  occupation  of  Russia." 

In  the  meantime  French  plans  had  expanded  with  the 
success  of  their  policy  of  pressure.  France  demanded 
the  right  to  construct  a  railway  from  the  Tongking  fron- 
tier to  Yunnan  and  a  few  other  privileges,  whereupon 
the  British  Government  adopted  the  policv  of  counter- 
concessions.     British   policy   and   British   demands  are 

!  i"  !!^*'i"^'"  ^''-  '•  '^'  Vol.  CV,  page  54. 
«See  "China,"  No.  i.  1899.  Vol.  CIX,  page  199. 


^^m'^.,A/-w 


GREAT  BRITAIN 


39 


-I 
■3 


illustrated  in  the  instructions  of  Mr.  Balfour  to  Sir  C. 
MacDonald  of  April  13,  1898: »  "  Inform  Yamen  that, 
although  they  have  not  followed  our  advice,  we  are 
anxious  to  maintain,  as  far  as  possible,  integrity  of 
China,  and  will,  therefore,  not  make  new  territorial  de- 
mands upon  them.  It  is,  however,  absolutely  necessary, 
if  we  are  to  pursue  this  policy,  that  they,  on  their  side, 
should  first  immediately  conclude  negotiations —  (a)  for 
giving  us  all  the  land  required  for  military  defenses  of 
Hongkong;  (b)  to  fulfill  their  promise  to  make  Nan- 
king :-.  Treaty  port;  (c)  to  give  some  railway  concession; 
(d)  an  agreement  as  to  the  non-alienation  of  Kuang- 
tung  and  Yunnan.  In  connection  with  condition  (d), 
it  is  in  the  interests  of  the  integrity  of  China  and  is 
justified  by  the  proximity  of  Yunnan  to  Burma,  and 
by  our  commercial  preponderance  in  Kuangtung." 

The  first  result  of  British  demands  was  a  convention 
for  the  extension  of  Hongkong,  signed  on  June  9, 
1898,"  by  which  China  granted  a  lease  for  ninety-nine 
years  of  400  square  miles  of  territory  in  the  peninsula 
of  Kowloon.  immediately  opposite  to  Hongkong.  As 
to  railway  concessions  mentioned  by  Mr.  Balfour,  Eng- 
land found  herself  soon  in  a  position  to  press  her  de- 
mands, when  the  Peking-Hankow  concession  menaced 
England's  interests  in  the  Yangtsze  Valley. 

5  See  "  China,"  No.  i,  1899,  Vol.  CIX,  No.  21 
«See  ''China.-  No.  i,  1899,  Vol.  CIX,  No.  174;  see  also  Rockhill, 
op.  cit.,  No.  12. 


30      FORIUGX  FINANCIAL  CONTROL  IN  CHINA 

One  of   the  first   things  undertaken   by   the   PrUish 
after  the  ratification  of  the  Treaty  of  Tientsin,  ha  J  be  n 
the  exploitation  of  the  Yangtsze-Kiang.     Since  British 
interests  along  the  great  valley  were  greater  than  those 
of  other  countries  and  as  it  was  alike  the  most  fertile, 
prosperous  and  densely  populated  region  of  China,  it  was 
essentially  the  most  important  British  sphere  of  interest 
in  that  country.     Hence  the  British  Government,  in  or- 
der to  prevent  eventual  inroads  of  other  powers  into  this 
territor>',  exchanged  in  February.  1898,  notes  with  the 
Chinese  Government  respecting  the  non-alienation  of  the 
Yangtsze-Region.^     In  this  correspondence,  which  in  its 
character  is  extremely  vague.  China  gives  an  assurance 
that   she   would   "never  alienate  any   territory  in   the 
provinces  adjoining  the  \'angtsze  to  anv  other  power, 
whether  under  lease,  mortgage,  or  any  other  designa- 
tion."    The  conclusion  of  the  agreement  was  highly  wel- 
comed by  the  British  interests  in  China.     Thus  writes 
the. China  Association  to  Lord  Salisbury:     "The  Asso- 
ciation has  ventured  on  former  occasions  to  indicate  the 
Yangtsze  Valley  as  a  region  in  which  British  interests 
must  prevail.     It   welcomed   with   cordial   satisfaction, 
therefore,  the  announcement  that  China  had  been  led  to 
promise  that  no  portion  of  that  area  should  be  leased  or 
ceded  to  a  foreign  power."  ® 

No.^"  "^'"''"  ^''-  '•  '^'  ^°'-  ^^=  ^^^  ^'-^^  R«^'<hill,  op.  cit., 
"See  "China,"  No.  i.  1899,  Vol.  CIX.  No.  25. 


■siTliR^- ^ifl 


GREAT  BRITAIN 


3» 


British  interests  now  were  menaced,  when,  in  1897,  ^ 
Belgian  syndicate  obtained  a  provisional  concession  for 
the  great  trunk  line  from  Peking  to  Hankow."  There 
was  clearly  ground  for  Great  Britain  to  be  alarmed  that 
Belgium  served  the  plans  of  France  and  Russia.  Lord 
Salisbury  declared  that  "a  concession  of  this  nature  is 
no  longer  a  commercial  or  industrial  enterprise  and 
becomes  a  political  movement  against  the  British  interests 
in  the  region  of  the  Yangtsze.  You  should  inform  the 
Tsungli-Yamen  that  Her  Majesty's  Government  cannot 
possibly  continue  to  cooperate  in  a  friendly  manner  in 
matters  of  interest  to  China,  if,  while  preferential  ad- 
vantages are  conceded  to  Russia  in  Manchuria  and  to 
Germany  in  Shantung  these  or  other  foreign  Powers 
should  also  be  offered  special  openings  or  privileges  in 
the  region  of  the  Yangtsze.  Satisfactory  proposals  will 
be  forthcoming  if  the  Chinese  Government  will  invite  the 
employment  of  British  capital  in  the  development  of 
those  provinces."  *"  Mr.  MacDonald  strongly  protested, 
whereupon  the  Yamen  assured  the  British  minister  that 
the  Russians  were  not  interested  in  the  scheme,  and  that 
no  agreement  admitting  the  Russo-Chinese  Bank  to  par- 
ticipation would  ever  receive  the  Imperial  sanction."  In 
spite  of  all  protests  the  Chinese  signed  the  final  contract 
of  the  Peking  Hankow  Railway  early  in  August,  admit- 

*  See  Rockhill,  op.  cit.,  No.  34. 

'"See  "China."  No.  i.  1899.  Vol.  CIX,  No.  175. 

"  See  "  China."  No.  i,  1899,  Vol.  CIX,  Nos.  196.  263,  289. 


32      FOREIGN'  FIXAXCIAL  CONTROL  IN  CHINA 

ting  the  Russo-Chincse  Bank  to  financial  participation  '» 
The  greatest  objection  which  the  British  raised  to  the 
contract  was  that  the  receipt  and  payment  of  funds  by 
the   Russo-Chinese   Bank,   on   behalf  of   the  syndicate 
would  pave  the  way  to  a  future  interference  with  the 
construction  and  control  of  the  line.     Mr.   MacDonald 
declared  Russian  admittance  a  "  breach  of  faith  "  on  the 
side  of  the  Chinese  and  demanded  "  reparation  "     He 
informed  the  Vamen  that  "  Her  Majesty's  Government 
considered  that  they  had  been  badly  treated  by  China  in 
the  matter  of  railway  concessions,  and  now  demanded 
from   the   Chinese   Government   the    right    for   British 
merchants  to  build  the  following  lines  upon  the  same 
terms  as  those  granted  in  the  case  of  the  Belgian  line-  - 
Tientsin  to  Chinkiang  (to  be  shared,  if  desired,  with  the 
Germans  and  Americans).  Honan  and  Shansi.  Peking 
syndicate  lines  to  the  Yangtsze;  Kowloon  to  Canton- 
Pukou  to  Sinyang;  Soochow   to   Hangchow,  with  ex- 
tension to  Ningpo.     The  lines  from  Shanghai  to  Nan- 
king, and  Shanhaikuan  to  Newchwang.  I  added    were 
not  included  in  this  list,  as  preliminary  agreements  had 
already  been  signed  for  them,  and  they  might  be  con- 
sidered settled."  ^^.     Mr.  Balfour's  instructions  further- 
more Illustrate  the  great  amount  of  pressure  exacted  by 
Great  Britain.     Mr.  MacDonald  was  authorized  to  in- 

See     China,"  No.  i,  iSgg,  Vol.  CIX,  No.  382 


GREAT  BRITAIN 


33 


form  the  Yamen  that,  "  unless  they  agree  at  once,  we 
shall  regard  their  breach  of  faith  concerning  the  Peking- 
Hankow  Railway  as  an  act  of  deliberate  hostility  against 
this  country,  and  shall  act  accordingly.  After  consulta- 
tion with  the  Admiral,  you  may  give  them  the  number 
of  days  or  hours  you  think  proper  within  which  to  send 
their  reply."  " 

The  Yamen,  being  aware  of  the  concentration  of  the 
fleet,  conceded  everything."  Thus  did  Great  Britain  ob- 
tain her  railway  concessions.  The  total  length  of  the 
lines  conceded  amounted  to  2,800  miles  extending  over  ten 
provinces,  as  compared  to  1.530  Russian  miles,  the  rest 
of  the  nations  falling  way  below  the  Russian  figure.*" 
To  England  fell  the  lion's  share  of  the  "  battle  of  con- 
cessions," as  Lord  Salisbury  properly  styled  this  "  peace- 
ful "  conflict." 

But  with  that  the  "  battle  of  concessions  "  was  not 
finished.  Russia  considered  Manchuria  and  Pechili  her 
exclusive  sphere  of  interest.  She  therefore  pressed  Pe- 
king for  the  removal  of  Mr.  Kinder,  an  Englishman, 
from  his  position  as  superintendent  of  the  Tientsin-Shan- 
haikuan  Railway,  demanding  that  the  "  line  north  of 
Shanhaikwan  should  be  constructed  by  Russian  engineers 
and    with    Russian   capital."  **     Ignoring   Russian    de- 

J*  See  "  China,"  No.  i,  1899,  Vol.  CIX,  No.  286. 
"  See  "  China."  No.  i.  1899,  Vol.  CIX,  No.  324 
i«  Detailed  analysis  will  be  given  below. 
"  See  "  China,"  No.  i,  1899,  Vol.  OX.  No.  232. 
"  Sec  "  China."  No.  2.  1899,  Vol.  CIX.  No.  2. 


">  . Ji^iK  «i' 


34 


FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 


"lands,  the  Hongkong  and  Snanghai  Bank  entered  into 
an  agrecnent  to  furnish  the  capital  to  construct  a  railway 
between^  Peking  and  Newchwang.  taking  a  „,ortgage  on 
the  i.ne.  »     This  caused  much  irritation  in  Russia  and  the 
relations   between    Russia   and    England   became   more 
stramed  than  they  were  Ix^fore.     The  friction  which  had 
ansen  over  railways  rendered  it  desirable  to  come  to  an 
understanding  in  regard  to  mutual  privileges  and  spheres 
of  interest  in  China.     After  a  long  series  of  negotiations 
an  exchange  of  notes  was  effected  between  the  two  coun- 
tries in  April.  1899.-     The  text  of  the  agreement  is  as 
follows:     "I.  Great  Britain  engages  not  to  seek   for 
her  own  account,  or  on  behalf  of  British  subjects  or  of 

tT r/J^''''"'  ^°"^^^«'°"^  to  the  north  of  the  Great 
Wall  of  Chma.  and  not  to  obstruct,  directly  or  indirectly 
applications  for  railway  concessions  in  that  region  sup- 
ported by  the  Russian  Government.     ..  Russia,  on  her 
part    engages  not  to  seek  for  her  own  account,  or  on 
behalf   of    Russian    subjects   or   of   others,    any    rail- 
way  concessions   in   the   basin   of   the   Yangtsze,   and 
not  to  obstruct,  directly  or  indirectly,  applications  for 
railway  concessions   m   that   region   supported   by   the 
British  Government."     By  a  supplementary  note,   the 
rights    of   the    British   and    Chinese   Corporation,    un- 
der  the   loan   contract,   over   the   section    from    Shan- 

"  See  "  China,"  No.  2  1800  Vnl  pty  at 
20  See  "fTrn,  •>  M  o      ,    '•  ^'^>  Nos.  4  and  10. 

see     LTiina,    No.  2,  1899.  Vol.  CIX.  No.  129. 


GREAT  BRITAIN 


35 


haikuan  to  Newchvvang  were  reserved,  "and  the  Chi- 
nese Government  may  appoint  both  an  English  engi- 
neer and  a  European  accountant  to  supervise  the  con- 
struction of  the  hne  in  question,  and  the  expenditure  of 
the  money  appropriated  to  it.  But  it  remains  understood 
that  this  fact  cannot  be  taken  as  constituting  a  right  of 
property  or  foreign  control,  and  that  the  line  in  question 
is  to  remain  a  Chinese  line,  under  the  control  of  the  Chi- 
nese Government,  and  cannot  be  mortgaged  or  alienated 
to  a  non-Chinese  company!  "  With  this  agreement  the 
"  sphere  of  interest  "  theory  was  considerably  strength- 
ened. 

In  the  case  of  the  other  trunk  line  from  the  north, 
that  from  Tientsin  to  Chinkiang  on  the  Yangtsze,  Eng- 
land inevitably  came  into  collision  with  the  interests  cf 
Germany.  The  English  were  bidding  for  construction 
or  at  least  participation  in  constniction  of  this  line.  The 
German  minister,  in  1898,  was  objecting  that  no  line 
could  be  constructed  through  Shantung  without  the  con- 
currence of  Germany.  In  .August.  1898.  Baron  Heyking 
informed  the  British  minister  of  his  instr.i.tion  from  his 
home  government,  of  which  the  respective  passage  reads 
as  follows:  "Should  the  Chinese  Government  decide 
to  grant  a  concession  f  .  le  Tientsin-Chinkiang  Railway 
regardless  of  German  claims,  you  are  instructed  to  op- 
pose such  a  decision,  end.  should  it  be  necessary,  you  may 
inform  the  Chinese  Government  that  the  German  Gov- 


msw:' 


.v> 


KOk!  I'.X   I  l.\A.\(  FAL  CONTROL  I\  i  HIXA 


ernmcnt  wrt..     cons.Her  as  '  non  avenu  '  any  conccssiot, 
m  that  proM  ice,  a.   i  uoul.l  reserve  the  right  of  making 
the  Chincse>  Government  responsihle  fur  any  such  conces- 
sion in  the  event  of  its  being  granted  by   hem.-  ^'     It  has 
to  be  remarked  he  v.  tha'    England  as  early  as  April. 
1898.  had  formally  ,U  laicd  to  (krmany  ■  "  that  in  i     ib- 
lishing  herself  at     \  eihii    ei   she  has  no   intention   of 
injuring  or  contest    ,n;  th.  rights  and  interests  of  Gen.    ny 
m  the  Province  of    -^ha:  •  ,  i^.  or     f  creating  diffi.ur,es 
for  her  in  that  province      It   is  especially   unders   .od 
that  England  will  not  construe  my  -ailroad  communica- 
tion   from    Weihaiuei    and    the    district    leased    there- 
with into  the  interior  of  the  Tr     aice  ■  t  Shar.tun^^     " 
But  a  mutual  official   declarati.  ii  as  to  the   respective 
spheres  of  interest  had  not  taken  place,     f^oth  govern- 
ments considered  'hat  a  specific  delimitation  .     uld  "not 
be  opportune,  and  that  a  friendly  u  derstand  ng  in  each 
case  as  it  arose  would  be  preferable.    -■'     Sii.  h  friendly 
compromise  was  finally  concluded  l>etueen  thv  respective 
German  and  British  financial  interests,  on  Sept.  ist  and 
2nd,  1898,  at  London.     The  text    ca  '     in  parts  as  fol- 
Iowl    ^< 

I.  British  sphere  of  interest,  viz.  : 

"  The  Yangtsze  Valley  subject  to  the  con-  ection  of  the 

"Sec     China,    No.  i.  1800   Vol.  CIX,  .\'n    ii 
"  See  ••  China."  \o.  i,  i8f/     Vol   CIX.  No    107 
"See  "China."  No.  ,.  1899.  Vol.  Ox]  No   'Z' 


C.Rt: AT  HKl T^L\ 


Z7 


M 


^  and     i<     loangho  Valley 

a-   1  Lheng^ting,   or   other 

ie.  ir      e  south  with  con- 

-liia  N.T     ing.     The 

/je<  the  con- 


Shantuii  lines  to  he  \  angis/e  a.  Chmkiang;  the  prov- 
inces SO!  of  the  N  anj^'ts/e:  the  fVovince  of  Shan  with 
connect  on  to  the  'ekir  •  iank  w  hnc  at  a  point  outh 
«  f  CheiiL'ting  ai  1  a  ci  acnng  lin*?  to  tht  Yangtszc  \  al- 
ley, crossin*,' the  ilDungh     Valley." 

J.  Gern.an  sphrn-  <  f  jj   ,jr,   t    yiz. : 

•■  lie  Province  Shain 
with  I  niu  ;on  !  .  rient->: 
•  )int  of  the  'Vking-ii  rk,.. 
iifinon  the  Vangts.  •  at  v 
ll'Mngho  ai  is  i-n(1«'r.-o' 
necirig  i   .V     n     :lan^        niinj  the  B        h  sphere 

of  i'    TCM.  af      ,u  th         .1,1.       ig  line  to  th.    Yi.ngtsze 
Vail       alst    ^1.   'irii^'      >  the  said  sphere  of  interest." 

Thi.>  V.  !s    grt  ^d  h  the  modification  that  the  line 

1  1  Tit  sin  to  (  inkiang  be  financed  jointly,  c 
St  iicte(;  eparatel)  cording  to  the  respective  spht 
tlsro  igh  ...iic!>  tl  s  \\  Te  to  run,  and.  on  completion. 

t.   Ix  worked  nn  ai     unt. 

The  variou  ay  q;    stions  had  led  to  manv  crit- 

'  moments  for  Great  Britain  in  1898.  In  order  to 
protect  h  r  own  iterests,  she  was  forced  to  desist  some- 
■^  fr  the  traditional  open  door  nolicy.  Standing 
'''jnt     iie  h  '\  tt.    fear  that  she  might  not  be  able  to 

tarn  Or    <  p'-  lute  integrity  against  the  aggression 

o?her  pov  .v  union  of  aim  between  her  and  any 

other  nation  or  a  combination  of  nations  she  recognized 


38      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

would  go  far  to  end  the  rivalries  ^vhich  threatened  to  par- 
tition China.     Consequently,  she  eagerly  seized  the  op- 
portunity of  expressing  her  adherence  to  the  open  door 
policy. in  replying  favorably  to  Mr.  Hay's  propositions 
of  1899.=^'     The  United  States,  though  it  has  never  taken 
an  active  part  in  the  opening  up  of  China,  had  gradually 
developed  a  very  considerable  interest  in  the  country, 
which  it  was  eager  to  see  preserved.     In  this  year  the 
United   States  sent  a  circular  letter  to  the  European 
Powers  to  seek  information  as  to  the  possibility  of  com- 
ing to  an  understanding  in  regard  to  the  maintenance 
of  treaty  rights,  and  the  safeguarding  of  the  integrity  of 
the  Empire.     The  requirements  of  the  policy  of  equal 
opportunity  known  as  the  "  open  door  "  were  categoric- 
ally set  out  in  this  circular,=»«  with  the  object  of  obtaining 
the  definite  adherence  of  the  various  powers  to  its  sup- 
port.    The  replies  of  all  the  powers  concerned  was  in  the 
affirmative.     England's  attitude  is  expressed   by   Lord 
Salisbury  in  his  acknowledgment  of  the  last  of  the  com- 
munications from  the  American  minister :     "  I  may  assure 
Your  Excellency  that  the  policy  consistently  advocated  by 
this  country  is  one  of  securing  equal  opportunity   for 
the  subjects  and  citizens  of  all  nations  in  regard  to  com- 
mercial enterprise  in  China,  and  from  this  policy  her 
Majesty's  Government  has  no  intention  or  desire  to  de- 


GREAT  BRITAIN 


39 


part."2T  A  similar  policy  was  contained  in  an  agree- 
ment identical  in  its  contents  to  the  note  of  Mr.  Hay, 
concluded  between  Great  Britain  and  Germany  in  Octo- 
ber, 1900.''* 

The  unfortunate  Jhinese  officials  in  the  meantime  had 
learned  that  in  spite  of  all  the  assurances  of  the  for- 
eigners, friendly  intercourse  might  be  as  dangerous  as 
open  hostility.     They  took  the  lessons  of  the  extorted 
concessions  to  heart  and  attempted  to  apply  their  experi- 
ence in  dealing  with  the  railway  problem.     Fearing  that 
railways  constructed  by  foreign  capital  might  later  be 
made  an  excuse  for  territo  ial  claims,  they  put  every  pos- 
sible obstacle  i..  the  way  of  such  undertakings.     Thus 
they  steadily  refused  the  pr(  nised  British  concessions  in 
Yunnan  and  decided  towards  the  end  of  1898  not  to 
give  any  new  railway  concessions  exclusively  to  foreign- 
ers.    To  that  end  they  issued  regulations  on  November 
19,  1898,  for  mines  and  railways  in  China,  which  throw 
light  on  the  real  motives  of  Chinese  policy.2»     In  these 
it  was  stated  that  the  concessions  in  Manchuria,  Shan- 
tung and  Luzchan  (referring  to  the  Russian,  German  and 
French  spheres)  "  are  afifected  by  international  relations, 
and  therefore  will  not  be  allowed  to  form  precedents 
either  for  Chinese  or  foreigners."     In  Article  9  it  is  re- 
quired that  Chinese  capital  was  to  be  employed  as  far  as 

=>'  See  Rockhill,  op.  cit.,  page  igi. 
='•  See  Rockhill,  op.  cit.,  No.  14. 
"  See  Rockhill,  op.  cit..  No.  48. 


40     FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

possible,  and  that  in  all  cases  of  concessions  an  endeavor 
must  be  made  to  have  the  Chinese  part  of  the  capital  in 
such  enterprises  the  greater  proportion,  at  least  a  mini- 
mum of  three-tenths  of  the  total.  By  another  rule,  as 
an  inducement  to  the  natives,  rewards  were  to  be  granted 
to  Chinese  promoters  raising  a  capital  of  500,000  taels, 
or  contriving  that  half  the  shares  in  a  company  were 
Chinese-owned.  The  essence  of  the  whole  matter  was 
summed  up  in  the  thirteenth  clause :  "  In  order  to  pro- 
tect the  sovereign  rights  of  China,  the  control  of  all 
railways  and  mining  companies,  irrespective  of  the  for- 
eign capital  concerned,  must  remain  in  the  hands  of  the 
Chinese  merchants."  The  regulations  clearly  meant  noth- 
ing else  than  an  absolute  bar  to  the  further  investment  of 
foreign  capital.  China  once  more  tried  to  rid  herself 
from  the  grip  of  foreign  influence.  But  she  found  her- 
self unable  to  do  so. 

While  they  were  not  at  all  without  success  as  far  as 
concessions  are  concerned  they  became,  on  the  other 
hand,  more  and  more  dependent  upon  the  foreigners  in 
another  phase  of  finance.  The  financial  necessities  of 
China,  a  resuh  of  the  Japanese  Wa  ,  and  the  indemnity 
had  provided  another  means  of  dependence  on  the  for- 
eigners and  a  new  lever  for  inducing  the  acceptance  of 
western  demands.  The  different  loans  contracted  in 
this  connection  amounted  to  L54,455,ooo  and  were  di- 
vided into  one  Franco-Russian  Government  loan  and 


GREAT  BRITAIN 


41 


two  joint  Anglo-German  Government  loans  of  1896  and 
1898,  each  being  Li6,ooo,ooo.3»  The  maritime  customs 
served  as  security  under  the  Inspector-General  of  Mari- 
time Customs.  A  special  assurance  to  Great  Britain  was 
that  the  Inspector  should  be  an  Englishman  so  long  as 
England  should  maintain  her  preponderance  of  trade.^* 
This  was  necessary  since  Russia  was  trying  to  insist  on 
a  Russian  for  the  post,  which  until  then  had  so  success- 
fully been  administered  by  Sir  Robert  Hart. 

The  permanent  foreign  pressure  for  concessions,  the 
territorial  acquisitions  and  the  constant  attempts  at  intro- 
ducing western  ideas  into  China,  or  in  other  words,  the 
period  of  1897-1898,  had  brought  about  a  strong  anti- 
foreign  sentiment  all  over  China.  The  result  was  the 
Boxer  Rebellion  of  1900.  Referring  to  its  causes, 
Lancelot  Lawton  quotes  from  one  of  the  proclamations 
issued  by  the  rebel  leader  Yu  Tung  Chen,  who  wrote : " 
"  These  foreigners,  under  pretext  of  trading  and  teach- 
ing Christianity,  are  in  reality  taking  away  the  bnd, 
food,  and  clothing  of  the  people;  besides  overturning  the 
teaching  of  the  sages,  they  are  poisoning  us  with  opium 
and  ruining  us  with  debauchery.  Since  the  time  of  Tao 
Kuang,  they  seized  our  territory  and  cheated  us  out  of 
our  money;  they  have  eaten  our  children  as  food  and 


2. 


^ina  Year  Book,"  1914;  see  Chapter  VIII. 
ina,"  No.  i,  1899.  Vol.  CIX.  No.  20. 
Lawton,  "The  Empires  of  the  Far  East,"  Vol.  I,  page 


I 


42      FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 
pile     ap  the  public  debt  as  high  as  the  hills;  they  have 
burnt  our  palaces  and  overthrown  our  tributary  states, 
occupied  Shanghai,  devastated  Formosa,  forcibly  opened 
Kiaochau,   and  now  wish   to  divide  up  China  like  a 
melon."     This   passage    shows    thai    the    Boxer    rising 
though  primarily  fanatical  in  its  aspect,  was  none  the 
less  evidence  of  the  awakening  of  a  national  spirit.     But 
once  more   the  Chinese   were   forced  to  recognize  the 
superiority  of  foreign  anns  and  foreign  methods.     The 
rebellion  resulted  in  humiliation  for  China. 

In  connection  v  th  the  Boxer  event  and  its  sequels 
there  are  two  points  of  supreme  interest.  The  first  is 
the  resulting  political  constellation.  The  campaign  dis- 
closed Russia's  diplomatic  duplicity.  Her  policy  was  to 
back  up  the  Chinese  against  the  European  Powers  in 
order  that  she  might  pose  as  the  protector  of  China  for 
her  own  ends.  She  displayed  a  friendship  for  China  and 
a  protective  attitude  directed  against  foreign,  especially 
English,  aggression.33 

England  was  well  aware  of  the  menace  which  Russia's 
policy  meant  to  her.  She  saw  in  Russia  her  traditional 
enemy  more  than  ever.  She  strongly  resented  the  for- 
ward policy  of  Russia  in  China,  but  found  herself  unable 
to  check  it  single  handed.  Consequently  she  looked  for 
an  alliance  which  might  restore  the  equilibrium  of  power 
in  the  Far  East.  The  ally  she  found  in  Japan.  The 
"  See  Chapter  III. 


GREAT  BRITAIN 


43 


island  kingdom  considered  itself  equally  menaced  by 
Russia's   aggression,    which    already    extended    to    the 
southern  shore  of  Manchuria  and  which  began  to  make 
itself  felt  in  Korea,  the  independence  of  which  kingdom 
was  of  vital  interest  to  Japan.     In  seeking  among  the 
powers  one  who  would  support  and  finance  her  in  active 
opposition  to   Russia's,  Japan's  inclinations  leaned  to- 
wards Great  Britain,  who  formerly  had  refused  to  join 
other  powers  in  turning  her  out  of  Port  Arthur.     Great 
Britain,  on  the  other  hand,  was  almost  forced  to  throw 
m  her  lot  with  Japan,  since  Japan  otherwise  had  to 
come  to  an  understanding  with  Russia  which  would  have 
destroyed  the  British  position  in  China  almost  entirely. 
The  Anglo-Japanese  Offensive  and  Defensive  Alliance 
concluded  on  January  30,  1902,  then,  was  intended  to 
check  the  encroachments  of  Russia  upon  Northern  China 
and  adjacent  territories  and  to  safeguard  British  and 
Japanese  commercial  and  financial  interests  in  those  re- 
gions ;  ^*  or  as  the  treaty  e.xpresses  it :  the  two  govern- 
ments are  "  specially  interested  in  maintaining  the  inde- 
pendence and  territorial  integrity  of  the  Empire  of  China 
and  the  Empire  of  Korea,  and  in  securing  equal  oppor- 
tunities in  those  countries  for  the  commerce  and  industry 
of  all  nations."     Its  significance  is,  according  to  Aubert, 
the  addition  of  a  maritime  sphere  of  influence  policy  to 
the  already  existing  territorial  sphere  of  influence  policy, 
»«  See  Rockhill,  op.  cit.,  No.  16. 


44      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

—  the  English  sphere  being  the  Indian  Ocean  and  the 
Japanese  sphere  the  seas  of  the  Far  East." 

The  second  point  of  importance  in  reference  to  the 
Boxer  rising,  is  the  indemnity  imposed  upon  China  ac- 
cording to  Article  VI  of  the  Final  Protocol  signed  on 
completion  of  negotiations  by  the  various  Powers  at 
Peking    on     September    7,     1901.36    The     indemnity 
amounted  to  L67,5oo,ooo,  Great  Britain's  share  being 
L7.425.000."     It  proved  to  be  a  tremendous  burden 
upon  China's  budget.     China  certainly  had  to  pay  heavily 
for  the  Boxer  rising,  which,  after  all.  was  nothing  else 
than  a  protest  against  the  aggression  of  1898. 

In  Article  XI  of  the  Peking  Protocol  the  Chinese 
Government  had  also  agreed  to  negotiate  the  amendments 
to  the  existing  treaties  of  commerce  and  navigation 
deemed  necessary  by  the  foreign  governments.  Ac- 
cordmgly  Great  Britain  concluded  on  September  5.  1902, 
a  new  commercial  treaty  with  China,  the  so-called 
Mackay  Treaty,  which  provided  for  further  trade  facili- 
ties  and  opened  a  few  new  treaty  ports.^s 

»«  See  Rockhill.  op.  cit,  No.  15 

"  See  Chapter  VIII. 

»«  See  Rockhill,  op.  cit,  No.  i8. 


fl 


GREAT  BRITAIN 


45 


After  the  successful  conclusion  of  the  alliance  with 
Japan,  and  the  treaty  with  China,  England  could,  at  least 
for  the  time  being,  breathe  freer.     Having  cleared  the 
horizon  of  menacing  clouds,  the  government  left  the  long 
deferred  and  hoped  for  expansion  of  trade  and  the  devel- 
opment of  the  railroad  schemes  to  the  parties  directly 
interested.     Excepting  official  support  given  to  the  Hong- 
kong and  Shanghai  Banking  Corporation  and  its  allied 
interests,  the  British  Government  retired  from  its  labors, 
so  to  speak,  and  from  now  on  did  little  in  protecting  or 
promoting  national  or  individual  interests.     "  Therefore 
when  questions  arose  from  the  evasion  or  repudiation  of 
China's  obligations  in  the  matter  of  railways  and  mining 
enterprises,  not  to  speak  of  everyday  commercial  cases, 
the  nature  of  the  support  rendered  by  His  Majesty's  Gov- 
ernment took  the  form  of  permitting  the  parties  con- 
cerned to  make  the  best  compromise  possible  and  pro- 
claiming the  results  (when  there  were  any)  as  triumphs 
of  British  diplomacy."  *" 

It  is  of  importance  to  know  that  British  policy  at  this 
period,  as  on  former  occasions,  continued  to  be  influenced 
primarily  by  the  English  business  world  in  China.  The 
Chinese  trade  had  gradually  built  up  predominant  local 
interests  in  the  hands  of  a  few  powerful  firms.  While 
British  foreign  policy  usually  is  largely  directed  by  pub- 
lic opinion,  the  constant  absence  of  any  public  opinion 
'•  Bland,  op.  cit.,  page  273 


JT"- 


46      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

regarding  China,  based  on  a  lack  of  interest  in  this  re- 
mote country,  had  caused  the  policy  of  the  Foreign  Office 
to  be  guided  by  the  advice  of  the  individuals  and  firms 
most  prominently  associated  with  China.  It  was  as- 
sumed that  those  who  had  long  experience  and  repre- 
sented special  interests  should  frequently  be  consulted  by 
the  Foreign  Office.  The  "  China  Association,"  for  in- 
stance, has  for  many  years  rendered  notable  services  to 
the  advancement  of  Great  Britain's  interests  in  the  Far 
East.  It  was  this  body  that  attracted  Lord  Salisbury's 
attention  to  the  dangerous  activities  of  France  in  south- 
ern China  and  Russia  in  Manchuria.*" 

As  the  problems  of  China  became  more  and  more 
involved  and  complicated,  and  as  railway  construction 
and  finance  began,  the  activities  of  the  vested  interests 
naturally  widened  and  added  the  cares  of  finance  to  the 
former  protection  of  trade.  "  As  a  direct  result  of  the 
situation,"  writes  the  Far  Eastern  Review,  "  arising  from 
the  keen  struggle  for  railway  concessions  in  i8q8  to 
strengthen  the  political  hold  of  the  European  powers  on 
China,  the  organization  of  a  purely  British  company  be- 
came essential  to  act  as  the  official  -nstrument  for  the 
execution  of  the  concessions  extracted  from  the  Chinese 
Government.""  The  forming  of  such  company  fell 
naturally  to  the  Hongkong  and  Shanghai  Banking  Cor- 

♦0  "  China."  No.  1,1^,  Vol.  CIX,  No.  25. 
♦* "  Far  Eastern  Review,"  Vol.  10,  page  297. 


;) 


':vV'-..  v'  ^T?Tf;ris?'^c-/K^"'' 


GREAT  BRITAIN 


47 


poration.  This  bank  was  the  predominant  British  finan- 
cial institution,  and  its  power  can  hardly  be  exaggerated, 
since  the  entire  British  community  in  China  depended 
more  or  less  on  its  credit  facilities. 

The  bank,  having  on  its  Board  of  Directors  the 
principal  partners  of  the  great  German  trading  firms,  had 
up  to  this  time  been  operating  under  an  agreement  with 
the  official  German  Banking  Syndicate  for  mutual  partici- 
pation in  administrative  and  railway  loans  to  China.*' 
When  the  battle  of  concessions  began  and  the  "  sphere  of 
interest "  policy  became  generally  recognized,  the  Hong- 
kong and  Shanghai  Banking  Corporation,  foreseeing  the 
great  advantages  and  profits  to  be  derived  as  the  repre- 
sentative British  organization  for  the  railway  develop- 
ment of  British  policy,  terminated  their  working  arrange- 
ment with  the  strong  German  syndicate,  and  the  manager 
on  April  4th,  1898,  directed  a  note  to  the  Foreign  Office 
to  the  following  effect : 

"  I  have  the  honor  to  acquaint  you  that  the  arrange- 
ments under  which  this  bank  has  hitherto  worked  with 
the  German  Syndicate  for  the  construction  of  railways 
in  China  has  been  term.inated  by  mutual  consent.  It  is 
now  agreed  that  the  German  Syndicate  and  ourselves 
shall  each  work  separately. 

"  I  may  here  mention  that  the  German  Syndicate,  always 

"See  Kent,  "Railway  Enterprise  in  China,"  page  150.    See  also 
Chapter  VIII. 


48 


I-ORHIC.X  FIXAXCIAI.  COXTROI.  IX  CHIXA 


a  powerful  combination,  has  of  late  consolidated  its  posi- 
tion very  much,  and  now  includes  all  houses  of  any 
importance  in  Germany.  It  also  enjoys  the  confidence 
of.  and  receives  the  support  of,  the  German  Govern- 
ment. 

"  In  order  that  British  commercial  interests  may  he 
fully  represented,  and  that  we  shall  l>e  in  a  better  position 
to  cope  with  the  po\,erful  combination  now  opposed  to  us 
in  China,  the  bank  has  decided  to  form  a  strong  repre- 
sentative and  infiuential  Syndicate  to  deal  with  railway 
construction  in  China.  ... 

"  In  the  meantime.  I  trust  the  explanation  I  have  given 
will  warrant  you  in  giving  the  necessary  instructions  to 
Sir  Claude  MacDonald  to  give  Messrs.  Jardine.  Alathe- 
son  and  Co..  and  the  bank  such  support  as  they  may 
require."'''' 

The  result  of  this  letter  was  the  early  organization  of 
the  British  and  Chinese  Corporation.  Ltd..  formed  by  die 
Hongkong  and  Shanghai  Banking  Corporation  and  the 
firm  of  Jardine.  Matheson  and  Co.     This  strong,  repre- 
sentative and  influential  syndicate  has  been  able  since 
to  command,  with  the  exception  of  the  Peking  Syndicate 
—  whose  activities  however  lay  in  another  direction  —  a 
monopoly  of  the  British  Government's  support.     This 
corporation  contracted  henceforth  with  the  Chinese  Gov- 
ernment the  construction  of  all  the  great  British  built 
"  See  "China.-  No.  i.  1809,  Vol.  CIX.  No.  5. 


f.:--i^rmpsLj 


GREAT  BRITAIN 


49 


railroads  in  China.  "  I'rom  time  to  time,"  says  the  Far 
liastcni  Rc:icu\  "  other  British  railway  constructors  en- 
deavored to  secure  a  footing  in  China,  but  were  compelled 
to  retire  after  severe  financial  losses  and  leave  the  field 
to  the  undisputed  control  of  the  official  commercial  organ- 
ization." *'  r'>:clusive  official  support  was  still  enjoyed 
during  the  international  l^an  negotiations,  when  the  Brit- 
ish Government  repeatedly  assured  the  syndicate  of  its 
protection.^''  And  it  was  mainly  owing  to  the  failure  of 
the.se  negt)tiations  that  the  field  for  financial  enterprise 
was  finally  opened  to  other  British  concerns. 

The  monopoly  exercised  by  the  syndicate  within  the 
British  sphere  and  under  Government  support  was  a 
monopoly  of  rights  to  contract  railway  construction  at 
the  e.xclusion  of  non -British  as  well  as  other  British 
interests.  On  the  strength  of  this  monopoly  the  syndi- 
cate concluded  agreements  with  the  Chinese  Government, 
by  which  it  was  granted  a  certain  amount  of  "  control  " 
to  be  exercised  within  the  sphere.  "  Control  "  indeed 
was  uppermost  in  the  minds  of  the  s\  ndicate  as  well  as 
of  the  British  Government.  Ti-'-  fact  that  "  foreign  con- 
trol "  was  assured  in  the  Pemg-Hankow  agreement, 
that  foreign  political  influence  might  menace  British  pre- 
ponderance in  the  Yangtsze  Valley,  an-!  that  "  by  differ- 
ential rates  and  privilefijes  the  managers  of  tiie  railways 

**  See  "  Far  Eastern  Review,"  Vol.  X.  pai?e  298. 
"  See  "  China,"  No.  2.  1912,  Vol.  CXXI,  No.  i  to  7;  see  also  Chap- 
tfr  VTII. 


■'-■aroE^-rm-wM. 


50 


l-'nRllcs  flN'AN-ClAI.  CONTROL  I\  CHIXA 


may  stranjrie  our  trade  "  worried  British  officials  con- 
siderably.^"    Terms  and   privileges  equal  to   those  ac- 
corded   to   other   .  aious   wea    ...emently    demanded. 
But  we  have  to  emp!,asi/e  that  the  Briti.sh  Covernment 
though  ,t  had  forced  the  Chinese  Government  to  grant 
railway  concessions  to  Braish  subjects  within  the  sphere 
had  no  part  whatsoever  in  construction  or  control  and 
>t      as  not  even  a  party  to  the  signing  or  wording  of 
the  railway  agreements  or  other  contracts  -  with   the 
exception  of  railways  and  also  loans  to  be  under  interna- 
tional  control." 

To  determine  the  amount  and  degree  of  control  exer- 
cised by  the  British  syndicate  we  now  have  to  turn  to 
the  respective  clau.ses  of  the  railway  agreements      The 
first  railway  contracted  was  the  section  Shanhaikuan- 
Newchwang  of  the  Imperial  Railways  of  North  China 
The  prebminar)-  agreement  wa>  signed  on  June  7.  ,898 
and  the  final  railway  loan  agreement  on  Oct.  10    1808* 
l^etween  the  syndicate  and  the  Administrator  General' 
o    the  Railways  of  North  China,  acting  under  authority 
of  the  Imperial  Chinese  Government.-     The  principal 
clauses,  establishing  control,  read  as  follows- 

In  Article  i :     The  Corporation  agrees  to  issue  on  be- 
half of  the  Admini  .rator-General  a  sterling  loan  for  the 

*»  See  Rockhill,  op.  cit..  Nos.  42  and  46. 


IP 


GRKAT  BRITAIN 


51 


amount  of  1.2.300,000.     (The  term  of  the  loan  being  45 
years;  Art.  <>.) 

In  Article  3 :     This  loan  shall  be  a  first  charge  upon 
the  security  of  the  permanent  way,  rolling  stock,  and 
entire  property,  with  the  freight  and  earnings  of  the  ex- 
isting lines  l)etween  Pekin."  and  Shanhaikuan,  and  on  the 
freights  and  earnings  of  the  new  lines  when  constructed. 
In  Article  4 :     The  principal   md  interest  of  this  loan 
are  guaranteed  by   rhe  Imperial  Government  of  China, 
and  in  the  event  of  default  in  payment  of  interest  or  re- 
payment of    principal  at  due  date,  the  Corporation  shall 
immediately  notify  the  Imperial  Government  of  China 
thereof,   and   the   Imperial   Government   of   China   will 
thereupon  prt)\  ide  the  funds  necessary  to  meet  such  pay- 
ment in  sterling  in  Londo        In  the  ^  -cat  y)f  the  Imperial 
Goverir  ont  of  China  being  unai^   'n  pr-^vide  'i.s  funds 
necessary  10  meet ;;  payment  of  ir         i    <  orinc.^  al,  when 
called  uf)on  by  the  Corporation  to      ;  .0  r    terms  of  this 
clause,  the  said  railway  lines  and  ♦      -  ■.;.".•  property  shall 
hereupon  be  handed  over  to  the  representatives  deputed 
by  the  Corporation  to  manage,  on  their  behalf,  until  prir- 
cipal  and  interest  of  the  loan  have  been  re'femed  in  ni;l 
when  the  management  will  re\ert  to  the     ailway  Admin- 
istration. .  .  . 

This  arrangement,  which  differs  from  other  contracts 
in  that  the  \dministrator-General  retains  com  '  of  the 
railway  lines  so  long  as  the  principal  and  interest       this 


52 


FORF.KiX  FINANCIAL  CONTROL  IN  CHINA 


loan  are  regularly  paid,  has  been  agreed  to  in  conse(,uence 
of  the  friendly  relations  which  have  long  existed  between 
the  Contracting  Parties. 

1"  Article  6:  During  the  currency  of  this  loan  the 
Unef  Kngineer  of  railway  shall  be  a  British  subject 
I  he  prnic.pal  members  of  the  railway  staff  shall  be  cap- 
able and  experienced  Europeans,  who  shall  be,  as  at 
present,  appointed  by  the  Administrator-General  of  the 
Railways.  .  .  . 

In  addition  to  the  alx3ve.  a  capable  and  efficient  Euro- 
pean Railway  Accountant  shall  be  appointed,  with  full 
powers  to  organize  and  direct  the  keeping  of  the  railway 
accounts,  and  to  act  with  the  Ad.ninistrator-General  and 
the  Ch,ef  Engineer  of  the  railway  in  the  supervision  of 
receipts  and  expenditure. 

In  Article  8:  All  receipts  and  earnings  of  the  lines 
herem  specified  shall  l>e  paid  into  the  credit  of  the  Rail- 
nay  Admmistration  with  the  Hongkong  and  Shanghai 
bankmg  Corporation,  Tientsin.  ... 

In  reimbursement  of  expenses  incurred  in  connection 
w.th  the  distribution  of  the  service  to  the  Ix^ndholders  of 
the  pnncpal  and  interest  of  the  loan,  the  Hongkong  and 
Shanghai  Banking  Corporation,  Tientsin,  shall  receive 
from  the  Railway  Administration  a  commission  of  U 
per  cent,  on  the  annual  loan  service,  which  will  be  in- 
cluded m  the  yearly  Schedule  for  the  same 

In  Article  ,4:     All  bonds  and  coupons  and  payments 


rjREAT  BRITAIN 


53 


made  and  received  in  connection  with  this  loan  shall  be 
exempt  from  Chinese  taxes  and  imposts  forever. 

The  next  railway  of  importance  contracted  was  the 
line  from  Shanghai  to  Nanking.  The  preliminary  agree- 
ment was  signed  on  May  13,  1898,  and  the  final  agree- 
ment on  July  9,  1903,  both  between  the  syndicate  and 
the  [director  General  of  the  Chinese  Imperial  Railway 
acting  under  authority  of  the  Imperial  Chinese  Govern- 
ment. The  final  agreement  provided  in  particular  for 
the  following  terms :  •"'  The  corporation  agrees  to  issue  a 
loan  not  exceeding  1.3,250,000,  for  which  Chinese  Gov- 
ernment Bonds  are  to  lie  issued.  The  duration  is  fifty 
years.  The  Chinese  Railway  administration  undertakes 
to  buy  and  pay  for  the  land  required.  The  loan  shall 
l)c  secured  by  mortgage  on  all  lands,  material,  rolling 
stock,  buildings  and  property  and  no  further  mortgage  or 
loan  shall  be  created  on  the  said  lines.  In  order  to  pro- 
vide for  a  final  authority,  a  "  Board  of  Control  "  is  cre- 
ated to  be  composed  of  the  Director  General  of  the  Chi- 
nese Railway  Administration  and  nominee  of  his,  to- 
gether with  three  representatives  of  the  syndicate.  The 
Chief  Engineer,  at  the  same  time  Chief  Administrator, 
sliall  be  nominated  by  the  syndicate  w  ith  the  concurrence 
of  the  Director  (jeneral,  and  shall  be  paid  by  the  Chinese 
railway  administration.  The  residue  of  the  net  profits 
in  each  year  after  paying  the  sum  annually  due  for  inter- 

"  .See  Rockhill,  op.  cit.,  No.  39. 


54      I-ORI-IUX  FIXAXCIAI.  t  UXTKOL  IX  CillXA 
est  and  redemption  of  the  loan  and  all  other  sums  which 
"'ay  be  due  to  the  syndicate,  shall  be  divided  into  five 
shares,  one  to  l,e  retained  by  the  syndicate  as  remunera- 
tion   f„r   superintendence   and    services;    the   syndicate 
shall  receive  five  per  cent,  on  the  entire  cost  of  all  ma- 
terials purchased   for  the  railway,     l-inally  it  is  to  be 
mentioned  that  all  lx)nds  are  exempted   from  taxation 
The  money  actually  lent  was  L2.250.000  in  1904  and 
Lf>3o,ooo  in  1907."" 

The  Canton-Kowloon  Railway  agreement  between  the 
Board  of  Foreign  Affairs  of  the  Chinese  Government 
and  the  British  and  Chinese  Corporation.  Ltd..  concluded 
on  the  7th  of  March.  ,907.  contains  control  provisions 
s.m.Jar  to  those  of  the  two  preceding  agreements.^'     Im- 
perial Chinese  (government  bonds  are  to  be  issued  for  the 
amount  of  1,1.500.000  similar  to  the  Ix^nds  of  the  Shang- 
hai-Nanking Railway,  with  the  railway  as  first  mortgage 
security  therefor.     The  loan  is  to  be  secured  bv  a  .specific 
and  legal  first  mortgage  in  favor  of  the  Corporation  upon 
all  lands,  materials,  rolling  stock,  buildings,  property  and 
premi.ses.  of  ever)'  description  purchased  or  to  l)e  pur- 
chased  for  the  railway,  and  o„  the  railway  itself    as 
and  when  constructed,  and  on  the  revenue  of'all  descrip- 
tions derivable  therefrom.     A  British  I'ngineer-in-Chief 
anu  a  British  Chief  accountant  are  to  be  associated  with 

^;^See  "China  Year  R.mk."  ,91.?.  Chapter  WI 
"  See  Kent.  op.  cit..  Appendix  F.  No  4. 


(.RKAT  MRITAIN 


55 


the  Chinese  Managing  Director.  It  is  also  agreed,  that  if 
interest  or  piincipal  in  accordance  with  the  amortization 
schedule  is  not  paid  on  due  date,  the  whole  railway  with 
all  its  appurtenances  mortgaged  to  the  Corporation  for 
the  landholders,  shall  Ije  handed  over  to  the  Corporation. 
The  Corporation  are  appointed  trustees  for  the  bond- 
holders. In  remuneration  for  all  services  rendered  by 
the  Corporation,  during  construction,  the  Corporation 
shall  receive  the  sum  of  L35,ooo.  The  handling  of  all 
funds  is  entrusted  to  the  Hongkong  and  Shanghai  Bank- 
ing Corporation. 

Next  in  importance  to  the  agreements  concluded  by  the 
British  and  Chinese  Corporation  come  those  conclude-! 
by  the  f'eking  Syndicate,  a  powerful  Anglo-Italian  cor- 
poration.^'^ .\lthough  the  driving  power  of  the  syndi- 
cate was  an  Italian  subject.  Mr.  Luzatti,  the  British  For- 
eign Oflfice  used  a  considerable  amount  of  "  pressure  " 
upon  the  Chinese  Government  towards  obtaining  the 
grant  of  the  concessions  in  question.*''  By  the  agree- 
ment from  May  -'i.  iSqX.  the  syndicate  obtained  the 
sole  right  to  open  and  work  the  coal  and  iron  deposits 
of  central  and  southern  Shansi  and  Honan  and  the  pe- 
troleum deposits  of  the  entire  province,  and  secured  the 
right  to  construct  and  operate  all  necessary  railways  to 
maintain  tnink  lines  or  navigable  waters  for  t.Kporting 

■■"^  See  Kent,  op.  cit..  Chapter  XIH. 

"Sec  "China,'  No.  i,  1899,  Vol.  CIX,  No.  6.  106,  and  otherwise. 


5^»      lOKI.KiN   I-IXAXCIAL  CONTROL  IX  CHINA 

the  mining  products.'*     "  All  matters  of  administration, 
exploitation,  employees,  and  finances  shall  be  controlle<' 
l»y  the  Board  of  Directors  of  the  Peking  Syndicate,  and 
the  Chief  of  the  Shansi  Bureau  of  trade  shall  cociperate. 
.  .  .   I'.ach  line  must  have  one  foreign  and  one  Chinese 
manager,  the  foreigner  to  control  the  works,  the  Chinese 
to  attend  to  all  matters  lietween  natives  and  foreigners. 
Accounts  will  he  kept  bv  the  foreign  system."     By  the 
agreement    for    the   Construction   of   a    Railway    from 
'iaokow  to  Chinghua  l)y  the  syndicate,  the  Chinese  Gov- 
ernment agreed  that  the  railway  for  all  practical  pur- 
poses was  to  remain  under  the  control  of  the  syndicate 
until  the  bonds  have  l)een  secured."'"'     The  amount  of  the 
loan  was  I^cxi.ooo  and  was  secured  by  a  first  mortgage 
on  the  railway,  its  line,  rolling  stock  and  earnings.     A 
conmiission  of  one-fourth  of  one  per  cent,  on  the  amount 
of  interest  coupons  paid,  and  the  like  commission  on  all 
bonds  drawn  for  payment  was  to  be  paid  to  the  syndicate. 
I'inally.  according  to  the  additional  working  agreement 
wa-  the  syndicate  entitled  to  receive  from  the  Imperial 
Chinese  Railway  Administration  20  per  cent,  of  the  sur- 
plus of  each  year. 

•Mthough  these  control  provisions  appear  to  Ite  very 
favorable  to  the  syndicate,  they  remain  nevertheless  in- 
sigtiificant,  since  this  railway  is  very  short  and  of  abso- 

■■♦  Sec  F^ockhill.  dp.  tit.,  No.  40. 

'•'■  Sec  Kent.  op.  cit.,  .Appendix  C.  Nos.  i  and  2. 


GREAT  BRITAIN 


57 


lutcly  secondary  importance  when  compared  with  the 
valuable  mining  concessions.  The  "  control  '"  provisions 
arc  in  substance  similar  to  those  of  the  British  and  Chi- 
nese Corporations'  agreements.  In  order  to  reduce  the 
alM)ve  enumerated  control  provisions  to  their  essence  and 
true  meaning  we  can  not  do  any  better  than  use  the  words 
of  Mr.  Willard  Straight  and  Mr.  Kent.  Mr.  Straight 
writes  in  "  China's  Loan  Negotiations  "  : ''" 

"  Control  in  the  at  present  accepted  sense  of  the  word 
was  first  embodied  in  the  agreement  made  by  the  Chinese 
(Government  in  1898,  with  the  British  and  Chinese  Cor- 
poration, for  a  loan  to  the  Imperial  Railways  of  North 
China. 

"  Under  this  agreement,  and  in  several  others  concluded 
at  alnmt  this  time,  the  lenders,  l^esides  securing  a  first 
inortgage  on  the  railway  whose  construction  they 
financed,  were  entitled  to  a  share  in  the  profits  of  the  line. 

"  For  this  reason  and  also  l)ecause  of  the  inexperience 
of  the  Chinese  in  railway  maUers,  the  bankers  required 
assurances  that  the  loaned  funds  should  be  so  expended 
that  the  mortgaged  property  would  constitute  a  suf- 
ficient security. 

"  They  furthermore  obtained  a  certain  share  in  the 
management  of  these  lines  in  order  that  there  shrnild  be 
secured  therefrom  an  adequate  return  (to  a  certain  per- 
centage of  which  the  banks  were  entitled),  and  to  prevent 

"•"  See  Straight,  op.  cit,,  page  131. 


■WP 


58      FOREIGN  FIXANXIAL  CONTROL  IN  CHINA 

the  administrative  inefficiency  and  fraud  which  they 
feared  if  the  operation  of  these  railways  were  placed  en- 
tirely in  Chinese  hands." 

Mr.  Kent's  summary  of  the  aspects  of  the  contracts 
is  similar :  ^^ 

"  Firstly,  the  syndicate  is  given  the  right  to  construct 
the  line,  and  in  return  for  its  trouble  in  this  connection  it 
is  in  most  cases  allowed  a  sum  equivalent  to  5  per  cent. 
on  the  total  cost.  It  is  this  right  which  presumably  gives 
rise  to  the  idea  of  concession. 

"  Secondly,  on  comnletion  of  the  line  it  is  placed  in 
some  cases  under  a  theoretically  joint  Chinese  and  for- 
eign control,  in  which  in  practice  the  foreign  element  pre- 
dominates. In  other  cases  the  Chinese  have  merely  a 
cojisultative  vo--ce. 

"  Thirdly  and  lastly,  at  this  stage,  or  rather  from  the 
time  of  the  is.sue  of  the  loan,  the  syndicate  become  trus- 
tees for  the  bondholders,  and  it  is  easy  to  see  that,  in  the 
nature  of  thir2:s,  the  loan  being  secured  by  a  first  mort- 
gage upon  the  railway,  the  position  of  the  syndicate  for 
all  practical  purposes  must  be  that  of  mortgagees  in  pos- 
session." 

Such  are  the  underlying  principles  of  the  agreements 
which  confer  these  rights,  which  for  want  of  a  more 
precise  tern)  we  call,  and  shall  continue  to  call,  conces- 
sions.     The  details,  of  course,  vary. 

"  See  Kent.  op.  cit..  page  95. 


GREAT  BRITAIN 


59 


According  to  Mr.  Kent  the  agreements  are  in  the  na- 
ture of  underwriting  contracts,  and  the  indirect  profits 
to  the  syndicate  accruing  therefrom  are  very  hand- 
some.'^* "  The  contracting  syndicate  undertakes  to  pro- 
vide 90  per  cent.,  for  example,  of  a  loan  of  so  many 
millions  of  pounds  or  dollars,  as  the  case  may  be,  re- 
payable at  a  certain  specified  time  and  bearing  interest 
at  the  rate  of  5  per  cent,  per  annum :  it  takes  its  chance  of 
being  able  to  float  the  loan  upon  the  public  at  a  higher 
percentage  of  its  nominal  value.  What  has  happened  in 
moi;t  cases  is  that  on  every  Lioo  bond,  for  example, 
issued  by  the  Chinese  f.k>vernmcnt  the  latter  received 
L90,  while  the  syndicate  have  succeeded  in  getting  them 
taken  up  at  L97  or  thereabouts,  thus  securing  a  respect- 
able margin  on  the  transaction." 

.Another  source  of  profit  to  the  banks  as  well  as  to 
English  industries,  was  the  provisions  which  made  the 
syndicate  the  purchasing  agents  of  materials  and  rolling 
stock.  Outside  of  the  fact  that  the  corporation  was  to 
receive  on  the  average  5  per  c«it.  commission  of  the 
entire  cost  of  all  materials  purchased,  the  materials  were 
naturally  almost  exclusively  purchased  in  England." 
Although  all  materials  were  nominally  to  \ie  purchased 
in  the  open  market,  the  usual  clause  that  "  at  equal  rates 
and  qualities,  goods  of  British  manufacture  shall  be  given 


"''  See  Kent.  op.  cit.,  paRe  04. 
'•See  also  Chapter  VIII. 


(yo      l-ORKKix  riNAXCIAL  CONTROL  IN  CHINA 

preference  over  other  goods  of  foreign  origin  "  provided 
an  opportunity  for  almost  exclusive  purchase  in  England. 
Thus  writes  the  Far  Eastern  Review,  referring  to  the 
open  market  provision :  "  We  find,  however,  that,  not- 
withstanding the  specific  agreement  the  purchases  were 
made  exclusively  in  London  without  reference  to  the 
lowest  price  or  open  tenders."  •"' 

On  the  strength  of  the  foregoing  analysis  we  now  draw 
the  conclusion  that  British  control  in  China  consists  of 
nothing  more  than  safeguards  for  the  protection  of 
the  Ixjndholders  and  hankers,  guaranteeing  proper  loan 
fund  expenditure  and  adequate  return.  British  control 
in  China,  exercised  exclusively  by  private  corporations,  is 
therefore  essentially  financial  and  non-political. 

Its  non-political  character  may  be  further  illustrated 
by  the  fact  that  the  syndicate,  in  spite  of  its  monopolistic 
rights,  admitted  non-British  interests  to  participation  in 
its  privileges  within  the  British  spiiere. 

On  l-ebruary  i.  1899.  the  British  and  Chinese  Corpor- 
ation and  the  American  China  Development  Company, 
the  latter  having  no  exclusive  government  support,  made 
an  agreement  that  each  party  should  offer  to  the  other  a 
participation  of  one-half  of  its  own  interest  in  any  busi- 
ness hereafter  obtained  by  it  in  China,  excluding,  how- 
ever, a  numl)cr  of  agreements  which  had  been  entered 

"oSee    "F-ir    F.astern    Review."    \oI.    VIII,    page    82      .Sec    also 
Straight,  op.  cit.,  page  123.  ^ 


^.i^^' 


aspri^rrnw 


GREAT  BRITAIN 


6 1 


into  previously  by  either  party."*     This  agreement,  how- 
ever, was  terminated  later. 

In  1905  the  British  and  Chinese  Corporation,  the  Pe- 
king Syndicate  and  l-rcnch  hankers  joined  for  general 
participation  as  to  railway  construction  in  the  Yangtsze 
Valley,  and  especially  in  the  regions  north  of  the  ^'ang- 
tsze  Valley,'"'  namely,  for  the  construction  of  the  Pukow- 
Sinyang  and  Sinyang-Chengtu  or  Hankow-Chengtu  rail- 
ways. 

One  of  the  objectives  of  the  British  and  Chinese  Cor- 
poration had  been  a  railway  from  Pukow  to  Sinyang  and 
its  eventual  extension  to  Chengtu.  The  Peking  Syndi- 
cate, however,  had  planned  a  line  which  would  seriously 
compete  with  the  British  and  Chinese  Corporations'  line 
"  Thi^  and  other  considerations  led  to  an  amalgamation 
of  the  two  companies  for  all  future  railroad  development 
north  of  the  Yangtsze,"  says  Kent.«'  The  combination 
was  henceforth  known  as  the  Chinese  Central  Railways, 
Ltd.  At  the  same  tir-ie  a  group  of  French  and  Belgian 
capitalists,  headed  by  the  Banque  de  I'lndo-Chine.  were 
also  interested  in  securing  the  concession  for  a  line  from 
the  Hankow-Sinyang  '"istrict  westwards  to  Chengtu."* 
To  avoid  competition  the  British  combination  entered 

*'  See  Rockhill,  op.  cit.,  Xo.  4Q. 

'•■■'  See  I-alioiilaye.  "  Le.s  Cheuiiiis  de  fer  en  Chine."  pages  182  and 

20h. 

•'  See  Kent,  op.  cit.,  page  ij8. 

•«  See  "  Far  Eastern  Review,"  Vol.  X.  page  20^- 


62 


roRKlCX  I-lXAXc  lAL  COX  '  ROL  1\  lHINA 


into  negotiations  with  tlie  1  rcnch  capitalists  for  joint 
construction  of  the  hncs  in  question,  absorbing  their 
interests  into  the  Cluncse  central  Railways.  Ltd.  The 
J'ukow-Sinyang  line  was,  however,  eventually  constructed 
as  a  purely  British  line."^ 

As  early  as  1895  the  Hongkong  and  Shanghai  Bank- 
ing Corporation  had   entered   into  an  agreui.cnt   with 
the  Deutsch  Asiatische  Bank  to  share  all  Chines.-  Govern- 
ment business  thereafter  obtained  by  either  party.     The 
resulting  financial  transactions,  done   in  common,  and 
especially  the  rientsin-i>ukow  agreement  with  its  import- 
ant control  provisions,  shall  l)e  analyzed  in  the  Chapter  on 
*'  International  Action."     Their  agreement  as  to  mutual 
participation  was  terminated  in  1898.  with  the  exception 
of  the  Tientsin-Chinkiang-I>ukow  Railway,  and  the  bank- 
ers  agreed  to  respect  their  mutual    pheres.*^     As  a  con- 
sequence the  Germans  abstained  for  several  years  from 
demanding  participation  in  the  railway  enterprises  within 
the   Yangtsze   sphere.     But.   presumably   owing  to  the 
political  and  economic  changes  after  the  conclusion  of  the 
Kusso-Japanese  War.  and  owing  to  the  increasing  com- 
petition  for  a  share  in  the  benefits  of   \oung  China's 
promised  development  of  trade  and  industries,  the  Ger- 
man bank  around  1908  changed  its  policy,     It  henceforth 
demanded  rights  of  participation  under  the  terms  of  the 
former  agreement  and  intended  to  compete  for  railway 
•'  See  » .low,  pagf  76  .«  See  abcvr.  papc  46. 


^lf»^ 


GREAT  BRITAIN 


63 


and  other  Chinese  Government  loans,  in  the  Yangtsze 
Valley  and  elsewhere,  unless  admitted  on  terms  of  equal- 
ity. The  British  financiers  acquiesced  in  the  German 
demand  for  participation,  and  the  Germans  associated 
with  the  British  and  French  interests  in  the  syndicate 
known  as  the  Chinese  Central  Railways,  Ltd.  The  activ- 
ities of  this  "  Tripartite  "  and.  after  the  admission  of  the 
United  States,  the  "  Four  Nations  "  group  from  now  on 
are  cosmopolitan  in  character  and  consequently  shall  be 
dealt  with  in  detail  in  the  Chapter  on  "  International 
Action." 

The  admission  of  German  participation  with  the  An- 
glo-French Combination  in  the  Yangtsze  railway  loans 
and  in  an  area  which  had  been  recognized  as  reserved  for 
the  British,  was  an  event  sufficiently  important  to  provoke 
criticism,  such  for  instance  as  has  been  forthcoming  from 
Mr.  J.  O.  P.  Bland  in  his  excellent  book  on  "  Recent 
Events  and  Present  Policies  in  China."  "^  His  criticism 
may  be  summarized  as  follows:  That  British  and 
French  financiers  worked  in  common  is  easily  explained 
by  the  excellent  relation  then  and  thereafter  existing  be- 
tween the  two  countries;  but  that  German  and  British 
financial  interests  should  continue  to  cooperate  in  the 
Far  East,  while  there  was  friction  between  the  two  coun- 
tries at  home,  was  a  matter  of  much  surprise  to  the 
English  world,  and  the  British  bank  having  for  years 
•'  See  Bland,  op.  cit..  pages  27^  d. 


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^4      FOREIGN'  FIXAXCIAL  CONTROL  IN  CHINA 

enjoyed  a  monopoly  of  British  Government  support  and 
become  identified  with  British  enterprise  of  far-reaching 
pohiical  importance,  could  not  openly  endorse  the  Ger- 
man claims  without  arousing  opposition  in  England. 
The  correspondent  of  The  Times  at  Peking,  expressed 
the  general  wonder  that  "  the  British  Government  should 
delegate  to  one  British  bank,  which  is  naturally  com- 
pelled to  consider  financial  rather  than  national  interests, 
the  right  to  assist  the  extension  of  German  influence."  "» 
It  was  demanded  that  the  Government  should  organize 
and  direct  the  use  of  British  capital  as  a  weapon  of 
offense  and  defense  and  that  it  should  follow  the  example 
of  other  countries  and  notably  that  of  Germany  where 
the  financiers  are  obliged  to  conform  strictly  to  the  polit- 
ical directions  of  their  Governments  who  are  profiting 
by  the  laisser-aller  methods  of  Great  Britain. 

The  reasons  that  the  Foreign  Office  showed  no  appre- 
ciation of  the  fact  that  other  nations  were  successfully 
developing  their  rights  of  railway  construction  to  the  sup- 
posed detriment  of  Great  Britain,  and  that  no  strong 
national  policy  could  be  expected,  is  on  the  one  hand 
evidence  of  the  absence  of  an  efifective  force  of  public 
opinion.  For  with  the  exception  of  very  rare  cases  Eng- 
land's policy  follows  and  does  not  lead  public  opinion. 
This  is  illustrated  in  a  manifesto  issued  by  the  China 
League  in  February,  1901,  wherein  the  following  passage 
•"  London  Times,  May  9,  1909. 


GREAT  BRITAIN 


65 


occurs :  "  At  a  time  when  the  future  of  China  hangs 
in  the  balance,  when  the  maintenance  of  our  position 
and  trade  in  that  Empire  (that  is  to  say,  the  welfare  of 
Great  Britain  in  years  to  come)  depends  on  the  imme- 
diate policy  of  her  majesty's  Government  and  the  action 
of  the  British  representative  in  the  Concert  of  the  Powers 
at  Peking:  at  such  a  time,  the  Imperial  Parliament,  its 
attention  apparently  concentrated  on  personal  explana- 
tions of  unimportant  matters,  enunciates  no  policy  on 
the  Far  Eastern  question.  Statesmen  on  both  sides  of 
the  House,  and  publicists  of  all  shades  of  opinion,  remain 
silent  m  regard  to  the  crises,  offering  no  solution  cal- 
culated to  protect  British  interests.  A  debate  on  the 
China  question  attracts  less  attention  than  a  minor  ques- 
tion of  parochial  Government."  *" 

Furthermore,  considering  the  situation  as  a  whole  and 
having  reference  to  the  particular  history  of  British- 
Chinese  relations  and  the  various  experiences  of  the  Gov- 
ernment, we  are  faced  with  the  fact  that  the  Government 
finally  was  wearied  by  the  futilities  of  the  many  negotia- 
tions and  the  ever  increasing  complexities  of  the  sit- 
uation. Great  Britain's  foreign  policy  in  China,  con- 
sistent with  the  traditions  of  British  statesmanship,  con- 
tinued to  be  guided  by  the  old  traditional  "  laisser-faire  " 
and  free  trade  principles,  which  had  made  the  Empire 


great. 


Therefore  it  left  the  control  of  Britain's  financial 
•'"  Sec  Bland,  op.  cit..  page  270. 


66 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


interests  to  the  parties  directly  interested.  And  there  is 
little  wonder  thu  the  business  of  the  British  Syndicate, 
being  unhampered  by  governmental  interference  or  re- 
striction, speedily  ^.ssumed  cosmopolitan  character.  For 
in  its  cosmopolitan  tendencies,  which  are  towards  elim- 
ination of  competition  and  towards  consolidation,  British 
finance  is  quite  in  harmony  with  leading  British  economic 
thought. 

According  to  Mr.  Hobson  and  other  prominent  econo- 
mists the  conception  of  nations  as  hostile  competitors  in 
world  finance  is  economically  unsound.'"  International 
finance  is  peace-loving,  since  the  cooperation  of  the  finan- 
ciers of  the  various  countries  in  business  enterprises  in 
all  parts  of  the  world  is  binding  up  the  prosperity  oi 
each  individual  country  intimately  with  the  welfare  of 
all  other  countries.  Says  Hobson:  "Modern  finance 
is  the  great  sympathetic  system  in  an  economic  organism 
in  which  political  divisions  are  of  constantly  diminishing 
importance."  '^ 

That  the  policy  of  non-interference  —  barren  of  deep 
laid  plans  such  as  characterize  the  policies  of  other 
Powers  in  China,  and  at  times  criticized  as  suicidal  to 
British  prestige  and  British  economic  interests  —  has  by 
no  means  handicapped  the  tremendous  growth  of  British 

•"See  J.  .'\.  Hobson,  "Work  and  Wealth."  Chapter  XVII-  see 
also  Same  "An  Economic  Interpretation  of  Investment,"  passim, 
and  J.  H   Withers.  "  International  Finance."  pages  93  ff 

"  See  Hobson,  "  Investment."  page  122. 


( 


GREAT  BRITAIN 


67 


railway  interests  in  China,  is  amply  illustrateo  by  the 
various  concessions  contracted  by  British  financiers  in 
later  years,  especially  in  19 14.  An  authoritative  text 
of  the  agreements  was  not  available  to  the  author,  with 
the  exception  of  one.  The  control  provisions  seem  to 
be  of  a  milder  form  similar  to  the  so-called  Tientsin- 
Pukow  terms,  which  will  be  a  subject  of  investigation  in 
Chapter  VIII.  Since  the  fate  of  these  railways  is  un- 
certain owing  to  the  war,  we  shall  only  give  a  brief 
enumeration  of  the  more  important  ones. 

The  final  loan  agreement  of  the  Pukow-Sinyang  Rail- 
way was  concluded  on  Nov.  14,  1913,  between  the  Chi- 
nese Government  and  the  Chinese  Central  Railways, 
Ltd.^*  By  Article  9,  the  Loan  was  secured  by  a  mort- 
gage on  the  railway,  all  lands,  materials,  rolling  stock, 
buildings,  etc.,  and  the  revenues.  And  according  to  Arti- 
cle 16,  the  construction  and  control  of  the  railway  shall 
be  vested  in  the  Chinese  Government  with  a  Chinese 
Director  General  and  a  British  Engineer  in  Chief. 

In  July,  1914,  an  agreement  for  the  construction  of  the 
Nanking-Pinghsiang  Railway  was  entered  into  between 
the  Chinese  Government  and  the  British  and  Chinese 
Corporation." 

And  finally,  also  in  July,  191  a,  a  final  agreement  was 
signed  between  the  Ministry  of  Posts  and  Communica- 

""^  See  "  Far  Eastern  Review,"  Vol.  X,  page  307. 
"  See  "  Far  Eastern  Review,"  Vol.  XI,  page  49. 


68 


FOREI(;\  FIXANCIAL  CONTROL  IN  CHINA 


tions  and  Messrs.  Pauling  &  Co..  Ltd..  of  London  for 
the  construction  of  a  railway  starting  from  a  point  on 
Ihe  Yangtsze  River  opposite  the  city  and  port  of  Shasi, 
m  the  Province  of  Hupeh,  through  Lichow.  Changteh.' 
Shenchow,  Vuanchow.  Chenyuan.  Kvveiyang.  Anshunfu' 
to  Shingyifu.  in  the  southwestern  corner  of  the  Province 
of  K\\eicho\v,  with  a  branch  from  Changteh  to  the  city 
of  Changsha,  the  capital  of  the  Province  of  Hunan.^'^ 
The  loan  is  for  Lio.ooo.ooo  for  40  years  at  f^ve  per  cent, 
interest.     Th.   railroad  is  to  he  built  by  contract,  a  firm 
of  British  consulting  engineers  acting  with  the  Chinese 
managing  director  in  drawing  plans  and  supervising  the 
work.     The  admission  of  Messrs.   Pauling  &  Co.  was 
due  to  a  w.  dification  of  British  policy  following  the  fail- 
ure of  the  International  Loan  Negotiations." 

Succeeding  chapters  will  incidentally,  by  means  of 
comparison,  further  emphasize  the  preponderance  of 
British  finance  in  China,  based  as  it  is  upon  the  wealth 
and  the  extended  and  old  established  trade  relations 
of  Great  Britain,  both  of  which  -  at  least  previous  to 
the  Great  W'ar  -  were  superior  to  those  of  any  other 
country. 


:!  i^^  "/'^'"  f-a^t^'-"  Review."  Vol.  xi.  page  ^ ' 
'''See  Chapter  VIII.  •  y  a^  :,- 


I 


CHAPTER  III 


RUSSIA 


Russia's  policy  in  the  Far  East  shows  a  marked  con- 
trast to  that  of  Great  Britain.  The  causes  of  this 
contra -t  lie  in  the  diflferences  in  national  character  and 
governmental  system  of  each.'  The  administration  of 
the  Russian  Empire  under  autocratic  rule,  resting  nom- 
inally in  the  hands  of  the  Tsar,  was  actually  entrusted  to 
a  body  of  ministers  and  officers  who  were  practically 
untrammeled  in  their  action,  and  their  freedom  was 
restrained  neither  by  the  criticism  of  a  free  press,  the 
influence  of  public  opinion,  nor  the  liability  of  being  de- 
prived of  office  by  a  parliamentary  vote  of  censure.  It 
follows  that  the  Russian  diplomatist  was  in  a  position  to 
attain  any  object  he  may  have  had  in  view. 

Russia  has  always  contained  statesmen  who  have 
guided  her  destinies  along  imperial  lines ;  statesmen  who 
have  seen  beyond  many  generations  and  whose  grand  and 
far-reaching  policy,  in  spite  of  grievous  errors  in  local 
administration,  has  made  the  Russian  Empire  what  it 
was  before  the  war.  But  their  system  was  entirely 
opportunist,  the  meihod  often  without  scruple.     In  her 

'  The  first  point  will  be  dealt  with  at  the  end  of  this  chapter. 

69 


ro 


I-UKKKiN  FIXAXCIAL  CONTROL  IN  CHINA 


descent  on  Asiatic  waters  Russia  has  been  impelled 
neither  by  the  need  of  extended  territor  nor  by  the 
desire  for  commercial  relations  with  other  countries. 
Indeed  Russia's  trade  with  China  was  and  is  insignifi- 
cant and  consists  mainly  of  importing  articles  of  Chinese 
manufacture  into  Russia,  notably  tea,  silks  and  drugs. 
Her  ambitions  were  po'-ical  and  her  absorptions  have 
been  prompted  partly  »  craving  for  a  seaboard,  partly 
by  a  political  instinc.  uf  expansion,  and  partly  by  the 
personal  ambitions  of  a  few  statesmen. 

It  may  be  said  that  the  designs  of  Russia  in  regard  to 
China  first  began  to  take  serious  shape        854,  when  the 
celebrated  Count  Muravieff  seized  the  Amur  River.     Al- 
though this  measure  of  aggression  may  have  long  been 
in  the  minds  of  Russian  statesmen,  it  was  precipitated 
by  reason  of  the  blockade  of  the  Black  Sea  during  the 
Crimean  War.     The  severance  of  communication  by  sea 
compelled  Russia  to  secure  control  over  the  river  as  a 
means  of  conveying  supplies  to  her  distant  possessions  in 
the    East.     It    was    Muravieff   himself   who   had   first 
aroused  public  interest  in  the  Amur,  when  he  defended 
Kamchatka  via  this  river.     To  quote  Vladimir:     "The 
unexpec:ed  news  of  the  gallant  defense  of   Petropav- 
lofsk,  a  detached  little-known  episode  of  the  Crimean 
War,  an  event  of  great  importance  in  the  Far  East, 
aroused  the  greatest  enthusiasm."  2    At  the  same  time! 
*  See  Vladimir,  "  Russia  on  the  Pacific,"  page  225. 


RUSSIA 


71 


as  Douglas  points  out :  "  The  Anglo-French  expedition 
of  1857-60  enabled  Russia  to  pose  as  the  friend  of 
China."  ^  The  result  was  the  Treaty  of  Aigun  o^  ivlay 
16,  1858,  strengthened  by  another  treaty  of  1860/ 
These  treaties  gave  Russia  the  whole  coast  of  Man- 
clmria  to  the  Korean  frontier,  the  so-called  Maritime 
Provinces,  and  provided  for  trade  free  oi  all  duties  and 
restrictions  between  Russia  on  the  land  frontiers. 
"  This  quiet  transfer,"  says  Vladimir,  "  was  due  more 
to  the  internal  troubles  and  foreign  wars  of  China,  than 
to  the  shadowy  nature  of  the  sovereignty  in  the  disputed 
territory." '  The  new  territory  thus  acquired  enabled 
Russia  to  found  her  great  eastern  seaport,  Vladivostok. 
By  the  same  treaty  the  right  of  Russia  to  retain  an  envoy 
at  Peking  was  conceded,  and  from  that  time  on  to  the 
present  Russia  has  retained  her  most  able  diplomatists 
at  the  Celestial  capital  for  the  purpose  of  developing 
her  aims  and  extending  her  interests  in  China. 

The  extension  of  these  interests  is  largely  connected 
with  the  building  of  the  Siberian  Railway.  It  had  be- 
come indispensably  necessary,  if  the  acquisition  of  the 
new  Far  Eastern  territory  as  well  as  the  whole  of  Siberia 
was  to  bear  any  fruit  for  Russia,  that  cheap  and  rapid 
means  of  communication  should  be  established  between 
European  Russia  and  the  head  waters  of  the  Amur. 

'  See  Douglas,  "  Europe  and  The  Far  East,"  page  190. 
*  See  Mayers,  op.  cit.,  page  105. 
'  See  Vladimir,  op.  cit.,  page  317. 


7-'      |-()Ri:i(i\  FI\.\\CI.\r.  tONTROL  IN'  CHIN'A 

The  conse(|uence  was  the  construction  of  the  Siberian 
Raii^vay  which  Madimir  calls  the  "economic  concomi- 
tant of  Russian  expansion  on  the  Pacific."     Although 
orifrinally.    as    far  as   the   motives   which    inspired    the 
scheme  of  the  Siberian  Railway  were  concerned,  these 
may  be  regarded  as  primarily  economical,  there  can  be 
no  doubt  that  the  strategical  advantage  began  to  loom 
up  m  large  proportions,  as  soon  as  the  construction  of 
the  line  through  to  the  Pacific  coast  was  actualh-  under- 
taken  in  1891.     While  up  to  this  year  the  preoccupation 
of  Russia  in  the  Balkans  and  in  Central  Asia  had  pre- 
xented  the  advance  of  Russia  south  of  the  Amur  and 
west  of  the  Ussuri.  she  now  began  to  give  the  problems  of 
the  Far  East  her  full  and  undivided  attention.     Russia 
began  to  realize  -something  of  the  immense  possibilities 
of  China,  and  last  not  least  she  recognized  that  her  ambi- 
tion was  only  partially  achieved  as  long  as  she  had  not 
found  a  harbor  entirely  free  from  ice,  Vladivostok  being 
iceboimd  for  several  months  in  each  year.     The  outcome 
of  such  considerations  was  found  in  an  extension  of  the 
Siberian  Railway  through  Eastern  Mongolia  and  Man- 
churia to  the  coast  of  the  Yellow  Sea.     To  this  end 
careful  surveys  were  made  by  Russian  experts  in  Man- 
churia, and  the  possibilities  of  the  country  studied  at  the 
instance  of  the  Russian  Government." 

Meanwhile.  Russian  diplomacy  was  exceedingly  active 

«  .See  Kent,  op.  cit.,  pages  40  ff. 


RUSSIA 


73 


at  I'ekinj,-  in  i8<)o  and  1891.  and  it  was  directeil  towards 
delayinj,'  the  construction  by  China  of  the  Manchurian 
railways  projected  by  Li  Hung  C  hang,  in  order  tii..t  con- 
cessions for  railways  in  this  region  should  be  granted 
to  Russia.  What  relations  Ixjtween  Li  Hung  Chang 
and  Russia  existed  at  this  time,  may  perhaps  never  be 
known.  He  may  or  may  not  have  intended  from  the 
beginning  to  concede  these  lines  to  Russia  for  a  consid- 
eration. 

It  was  so  much  easier  for  the  Russians  to  reach  their 
ends  as  Li  Hung  Chang,  that  astute  Chinese  statesman, 
though  aiive  to  Russian  antagonism,  shared  Russia's 
suspicion  of  the  Japanese  and  set  to  work  to  secure  Rus- 
sia's prospective  help  in  his  plans  to  thwart  Japan.  The 
trouble  centering  around  Korea  was  lx)ding  ill  for  the 
peace  of  the  Far  East.''  To  Russia.  China  always  had 
looked  as  the  mighty  neighlx)r,  for  Russia  in  her  con- 
tact with  the  Chinese  never  had  failed  to  impress  the 
celestials  with  a  sense  of  her  power.  Li  Hung  Chang 
acted  towards  Russia  in  a  friendly  spirit  and  treated  her 
as  a  Power  which,  being  geographically  and  historically 
quite  differently  situated  to  the  rest  of  Europe,  was 
worthy  of  difierent  treatment. 

The  result  of  the  Korean  War.  so  disastrous  to  China, 
tightened  the  bonds  of  sympathy  between   Russia  and 
Chin: .     The  alarm  experienced  in  Peking  at  the  spec- 
"  See  Douglas,  op.  cit.,  page  304. 


74      I-ORKIGX  FINANCIAL  CONTROL  IN'  CHINA 
taclc  of  Japanese  tr.x.ps  overrunning   Korea  and   the 
Liaotung  peninsula  was  shared  in  St.  Petersburg.     Japan, 
as  will  h,  shown  later,  had  disclosed  her  hand,  and  in 
doing  so  had  stimulated  Russian  diplomacy  to  the  e.xer- 
cise  of  the  greatest  ingenuity  in  order  to  deprive  her  of 
the  substantial  fruits  of  her  victory,     It  was  inevitable 
that  Russia  should  rely  on  diplomatic  action,  for  military 
measures  were  not  at  that  time  practicable.     The  Sibe- 
riati  Railway  was  not  completed,  and  it  would  have  been 
impossible    for  her  to  throw   into   Manchuria  a   force 
sufficient  to  effect  the  seizure  of  the  Liaotung  peninsula 
from  Japan.     She  therefore  used  the  Yellow  Peril  argu- 
ment with  such  effect  that  Germany  and  France  joined 
her  m  insisting  upon  the  withdrawal  of  Japan  from  Port 
Arthur  and  from  Korea.«    Japan  had  to  accept  the  in- 
evitable, and  to  withdraw,  for  she  could  not  have  with- 
stood a  naval  attack  upon  her  shores  by  three  allied 
powers. 

It  is  of  great  significance  that  Li  Hung  Chang  had 
accepted  the  Japanese  conditions  without  demur.     He 
had  apparently  previously  come  to  an  understanding  with 
the  Russian  representative  at  Peking,  by  which  the  in- 
tervention of  the  Tsar  was  promised  to  prevent  the  per- 
manent occupation  of  the  Chinese  territorv  by  Japan 
and  he  knew  that  the  most  important  clause  in  the  peace- 
treaty  would  not  be  allowed  to  be  carried  out.     Natu- 
•See  Le  Roy  Beaulieu.  "The  Awakening  of  the  East."  page  247. 


RUSSIA 


75 


rally  his  gratitude  town-  is  Russia  was  great,  and  his 
obligations  soon  resulted  in  a  large  increase  of  Russian 
influence  at  Peking."  During  the  latter  part  of  1895, 
and  the  entire  year  of  1896,  Russian  diplomacy  was  very 
busy  in  impressing  upon  the  Chinese  the  fact  that  it  was 
Russia  alone  who  had  saved  her  from  the  fate  of  losing 
parts  of  Manchuria,  that  closer  relations  with  Rur-*  < 
wouid  ensure  China's  safety,  and  that  a  compen«';  1  !, 
should  be  given  to  Russia  in  some  form. 

The  visit  of  Li  Hung  Chang  to  St.  Petersburg  in  1895 
pa\  ed  the  way  for  the  striking  events  that  were  to  follow 
in  Manchuria.*"  Li  Hung  Chang  was  sent  as  Plenipo- 
tentiary Extraordinary  to  be  present  at  the  coronation  of 
the  Tsar  in  Moscow.  During  his  visit  to  Russia  there 
were  rumors  of  the  confirmation  by  him  of  a  secret  con- 
vention which  had  been  entered  into  between  China  and 
Russia  in  1895.  the  so-called  Cassini  Convention.  Count 
Cassini,  the  Russian  minister  to  Ch:  was  said  to  have 
had  a  series  of  interviews  wth  the  ..ceroy  of  Pechili, 
with  whom  he  negotiated  a  secret  treaty,  which  was 
subsequently  ratifie  ;  ')y  Prin  c  Lobanow.  the  Russian 
minister  of  foreign  a.fairs.  The  alleged  text  of  this 
agreement   was   published   in   the   North   Chim   Daily 

»  The  mysteries  of  Li  Hung  Chang's  relations  to  Russia  have  been 
expounded  in  almost  every  important  book  on  the  Far  East.  Reli- 
able official  data  are  not  available  and  the  author  has  merely  pre- 
sented a  brief  summary  of  the  situation. 

•"  See  Kent,  op.  cit.,  pages  46  ff. 


I 


76      FOREIGX  FIXAXCIAL  CONTROL  IX  CHINA 

A'm-^/'    but   official    denials    were    at    once    published 
Subsequent  events,  however,  have  proved  that  an  under- 
stanchng  had  been  come  to  between  Russia  and  China, 
which  for  all  practical  purposes  was  in  the  terms  of  the 
document  published  in  the  Shanghai  Journal.     "  Puttin- 
the   matter   briefly,    the   arrangement   amounted   to   an 
exchange  of  guarantees,  Russia  undertaking  to  support 
Chma  against  foreign  aggression  in  return  for  certain 
fac.ht.es  for  the  extension  of  Russian  interests  and  the 
construction  of  railways  in  Manchuria."  '-     In  the  Cas- 
.'  ni  Convention  we  see  according  to  Mr.  Putnam  Weale 
the  three  main  points  of  view  at  work,  which  Russia 
wanted  China  to  get  accustomed  to :  ^■'     "  The  first  was 
that  Russia,  being  without  any  convenient  br.ses  in  the 
]''ar  East,   free   from  ice  all  the  year  round,  must  be 
granted  some  port  or  ports,  which  she  could  share  with 
Chma.     The  second  point,  leading  as  it  were  to  the  third, 
was.  that  unless  Russia  were  able  to  exert  her  great 
strength  as  a  land  Power  her  friendship  with  China  could 
not  take  the  form  of  material  support  in  case  a  fresh 
cr,s,s  .n  the  Far  East  should  arise,  and  Japan  attempt 
to  repay  Ch.na  for  calling  in  the  help  of  the  West.     And 
the  third  and  concluding  point  was  this:     In  order  to 
bring  her  myriads  of  soldiers  to  the  Far  East.  Russia  had 

Cvf^''u^°''^  S'""'  ""'■"'^'•"  ^^^-'^''^^  -50th.   .8q6,  pages  7v>--o 

"  ''s?^;^  z  ^i..:'r-5-^-'  ^-  --  ^•o>•  ni;  Se^^^if: 

'^  See  Putnam  Weale,  "  The  Reshaping  of  the  I.'ar  I-ast,"  page  26.3. 


RUSSIA 


77 


already  begun,  years  before  the  Japanese  War,  a  grand 
trunk-  railway  at  great  expense  to  herself;  but  as  the 
railway  would  have  to  follow  the  northern  bank  of  the 
Amur,  it  would  be  indefinitely  delayed  unless  a  more 
conxenient  route  could  be  granted  by  generous  and  mag- 
nanimous China,  who  had  already  bestowed  the  Pri- 
morsk." 

The  Cassini  Convention,  it  was  believed,  also  made 
some  provisions  in  regard  to  the  acquisition  of  Kiaochau 
by  Russia,  while  the  Liaotung  Peninsula  was  ear-marked 
in  Russia's  favor."     Russia's  propositions  seem  to  have 
appealed  to  Li  Hung  Chang,  though  it  is  hardly  to  be 
doubted  that  he  fathomed  the  true  significance  of  the 
convention.     He  wanted  an  alliance ;  and  the  defensive 
alliance  with  Russia  was  the  peg  on  which  he  hung  the 
railway  concession.     "  Li  Hung  Chang,  in  his  communi- 
cations to  the  Chinese  Government,  laid  all  the  stress  upon 
this  guarantee,  stating  that  it  was  of  inestimable  worth 
to  China,  against  whom  England  and  Japan  were  hatch- 
ing plots.     He  treated  it  as  the  price  to  be  paid  for  the 
railway  charter,  and  all  the  other  grants  that  were  super- 
added to  the  charter."  i"' 

Shortly  after  his  return  to  China.  Li  Hung  Changs 
arrangement  with  Russia  began  to  bear  fruit.  The  first 
manifestation  took  the  form  of  the  Manchurian  Rail- 

'*See  Corclier,  op.  cit.,  pages  34?  flF. 
'"'Lawton,  op.  cit.,  V'ol.  II.  page'1293. 


78      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

way  agreement  between  the  Chinese  Government  and 
the  Russo-Chinese  Bank.     This  bank  was  destined  to 
play  a  great  role  in  the  succeeding  events  and  its  estab- 
lishment marks  the  beginning  of  Russian  "  conquest  by 
railroad  and  bank."     The  original   inscription  bearing 
imperial  sanction  was  signed,  it  is  important  to  note, 
by  the  "  Manager  of  Affairs  of  the  Committee  of  the 
Siberian  Railway."  >«     In  virtue  of  the  charter,  a  joint- 
stock  company  was  founded  with  a  capital,  originally 
fixed  at  six  million  roubles  —  increased  later.     Accord- 
ing to  Part  II,  Article  14:     "  The  object  of  the  Russo- 
Chinese  Bank  is  exclusively  to  develop  relations  with  the 
East-Asiatic  countries."     Among  the  usual  banking  op- 
erations are:     "The  collection  of  duties  in  the  Empire 
of   China,   and  the  transactions   relating  to  the   State 
Treasury  of  the  respective  place,  the  coinage,  with  the 
authorization  of  the  Chinese  Government,  of  the  coun- 
try's money,  the  payment  of  the  interest  on  loans,  con- 
cluded by  the  Chinese  Government,  the  acquisition  of 
concessions  for  the  construction  of  railways  within  the 
boundaries  of  China  and  the  establishment  of  telegraph 
lines." 

Though  the  bank  appears  to  be  a  private  corporation 
under  Government  protection,  its  political  aspect  is  quite 
apparent.     "  In  addition  to  a  banking  department  it  has 

'«  S«  Rockhill,  op.  cit.,  No.  31.    See  also  Putnam  Weale,  "  Man- 
chii  and  .Muscovite,"  page  126. 


RUSSIA 


79 


a  political  side,  to  which  the  former  is  said  to  be  sub- 
ordinated." " 

On  Sept.  8,  1896,  the  Russo-Chinese  Bank  entered 
into  an  agreement  with  the  Chinese  Government  for  the 
construction  and  management  of  the  Chinese  Eastern 
Railway.^*  The  principal  provisions,  establishing  Rus- 
sian control,  are  as  follows  : 

In  Article  i  :  "  China  and  Russia  establish  a  Com- 
pany to  be  called  the  Chinese  Eastern  Railway  Co.  to 
construct  and  manage  this  Railway.  ,  .  .  The  regula- 
tions of  the  Company  will  be  in  conformity  with  those 
of  Russian  Railway  Companies.  Shares  may  only  be 
bought  by  Chinese  and  Russians." 

In  Article  6 :  "As  regards  the  land  required  by  the 
Company  for  constructing,  managing,  and  protecting 
the  line  and  adjacent  land,  for  procuring  sand,  earth, 
stones  and  lime,  if  the  land  be  government  land,  it  will  be 
given  the  Company  without  payment.  ...  All  the  Com- 
pany's land  will  be  exempted  from  land  tax.  As  soon 
as  the  land  comes  under  the  management  of  the  Com- 
pany, they  may  erect  thereon  any  buildings  and  carry  on 
all  kinds  of  work,  they  may  establish  a  telegraph  line 
thereon  worked  by  the  Company  for  the  Company's 
use." 

Article  7 :     "  All  materials  required  by  the  Company 

1'  See  Kent,  op.  cit.,  page  47. 
"  See  Rockhill,  op.  cit.,  No.  32. 


^^pi^rzivSvi 


8o      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


for  the  construction  and  repair  of  the  Hne  will  be  exempt 
from  taxation." 

In  Article  8:  "  All  Russian  troops,  -aval  or  military, 
and  munitions  of  war,  moved  by  the  Russian  Govern- 
ment by  this  Railway,  must  be  conveyed  by  the  Company 
directly  across  the  border." 

In  Article  lo:  "As  to  goods  conveyed  by  this  line 
from  Russia  to  China  or  from  China  to  Russia,  they 
will  pay  duty  according  to  the  Treaty  Tarifif,  i.e.,  an 
Import  or  Export  duty  as  the  case  may  be,  but  subject 
to  a  reduction  of  one-third  of  the  Tariff  rate." 

On  the  strength  of  this  agreement  the  "  Chinese 
Eastern  Railway  Company  "  was  formed  *'  for  the  con- 
struction and  working  of  a  railway  within  the  conrines 
of  China  from  one  of  the  points  on  the  western  borders 
of  tne  Provinces  of  Hei-Lun-Tsian,  to  one  of  the  points 
on  the  eastern  borders  of  the  Province  of  Kirin  and  for 
the  connection  of  this  railway  with  those  branches  which 
the  Imperial  Russian  Government  will  construct  to  the 
Chinese  frontier  from  Trans-Baikalia  and  the  southern 
Ussuri  lines."  ^"  The  Company  is,  furthermore,  empow- 
ered, subject  to  the  sanction  of  the  Chinese  Government, 
to  exploit,  in  connection  with  the  railway  or  independ- 
ently o^  it,  coal  mines,  as  also  to  exploit  in  China  other 
enterprises  —  mining,  industrial,  and  commercial.  The 
formation  of  the  Company  shall  be  undertaken  by  the 

i»  See  Rockhill,  op.  cit.,  No.  33. 


RUSSIA 


8i 


Russo-Chincse  Bank.     With  the  formation  of  the  Com- 
pany all  rights  and  obligations  are  transferred  to  it  in 
regard  to  the  construction  and  working  of  the  line  ceded 
in  virtue  of  the  above  named  Agreement  of  the  8th  of 
September,  1896.     In  virtue  of  this  Agreement  the  Com- 
pany shall  retain  possession  of  the  Chinese  Eastern  Rail- 
way during  the  course  of  eight;    years  from  the  day  of 
the  opening  of  traffic  along  the  whole  line.     But  on  the 
expiration  of  thirty-six  year'-  tl.v.  Chinese  Government 
has  the  right  of  acquiring  the  line.     The  railway  is  to 
be  conducted  subservient  to  the  requirements  of  the  Si- 
berian Railway.     In  the  event  of  a  dilfen-nce  of  opinion 
arising  between  the  two  railways  the  Chinese  Eastern 
Railway  shall  submit  to  the  decision  of  the  Russian  Min- 
ister of  Finances.     The  Russian  lett-r  and  parcels  post, 
as  also  the  officials  accompanying  the  i;ame,  shall  be  car- 
ried by  the  Chinese  Eastern  Railway  free  of  charge. 
The  preservation  of  law  and  order  on  the  lands  assigned 
to  the  railway  r,nd  its  appurtenances  siiall  be  confined 
to  police  agents  appointed  by  the  Company.     The  capital 
of  the  '"ompany  shall  bt  formed  by  the  issue  of  shares 
and  bonds.     The  shares  shall  be  fixed  at  5,000,000  rubles. 
The  remaining  portion  of  the  capita'  of  the  Comnany 
will  be  formed  by  the  issue  of  bor  The  nominal 

amount  and  value  of  each  issue  of  bonds  shall  be  subject 
to  the  sanction  of  the  Minister,  of  Finances.  The  Rus- 
sian  Government    will   guarantee   the   interest   on   and 


82      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

amortization  of  the  bonds.  For  the  realization  of  these 
bonds  the  Company  must  have  r^  ourse  to  the  Russo- 
Chinese  Bank. 

The  character  of  "  control  "  established  by  the  fore- 
going agreements  can  easily  be  ascertained.     The  fact 
that  according  to  Article  i  of  the  last  a-^reement  "  the 
Director  of  the  Company  will  be  appointed  by  China," 
and  that  "  his  duty  will  be  to  supervise  the  task  dele- 
gated to  the  Company  by  China,  and  to  ascertain  whether 
his  obligations  are  faithfully  performed,"  does  not  alter 
the   fact  that  the  Company  is  a   Russian  joint  stock 
company,  run  by   Russians,   with   Russian  money,  and 
under  Russian  rules.     One  of  the  points,  which  is  em- 
phasized by  Kent,  is  that  "  no  person  except  of  Chinese 
or  Russian  nationality  could  become  a  shareholder,  which 
meant,  of  course,  a  purely  Russian  company,  for  .  .  . 
the  Chinese  had  not  reached  that  stage  of  education  when 
the  idea  of  joint-stock  enterprise  either  inspires  con- 
fidence or  appears  attractive."  20     And  Kent  continues: 
"  In  this  company,  which  wai  to  be  known  and  ulti- 
mately came  into  existence  as  the  Chinese  Eastern  Rail- 
way Company,  the  sole  control  of  the  line  was  vested, 
and  also   rights,   in  connection  with   the   railway,   and 
independently  of  it,  of  mineral,  industrial,  and  commer- 
cial exploitation." 

But  in  addition  to  the  fact  that  this  railway  company 
2"  See  Kent,  op.  cit.,  page  48. 


■JrrTS^™^?-^ 


RUSSIA 


83 


is  of  Russian  ownership,  we  Lave  to  bear  in  mind,  that 
the  control  over  the  owners  is  exercised  by  the  Russo- 
Chinese  Bank,  a  state-controlled  institution.  To  justify 
this  contention  it  would  not  even  be  necessary  to  ascer- 
tain who  the  owners  of  the  shares  are.  It  appears  to 
us,  on  the  strength  of  all  "  control  "  provisions,  as  self- 
evident  that  the  road  Is  state-controlled  and  that  Rus- 
sian control  in  Chine  is  of  a  political  nature.  To  dis- 
perse any  doubt  about  the  nature  of  Russian  control  we 
shall  support  our  contention  by  the  f(  -lowing  considera- 
tions: Comparing  the  Russian  control  provisions  with 
those  to  be  found  in  the  British  agreements  we  find  that 
no  protection  is  made  for  the  shareholders,  who  are  the 
nominal  owners.  There  is  no  mortgage  on  the  railway, 
because  there  is  no  loan  made  to  the  Chinese  Government. 
Only  the  boidholders  are  protected,  namely,  by  a  Russian 
Government  guarantee!  The  management  rests  perma- 
nently with  the  company,  though  nominally  under  Chi- 
nese supervision.  In  fact  all  control  provisions  char- 
acteristic of  English  agr'^ements  are  absent.  Tbi's  fact, 
however,  would  in  itself  not  be  sufficient  to  prove  the 
political  character  of  Russia's  control.  Nominally,  Rus- 
sian control  remains  financial,  since  the  contracts  con- 
taining the  respective  provisions  are  on  the  Russian  side 
concluded  by  private  citizens  and  since  the  object  of  the 
contracts  is  a  financial  proposition,  namely  the  building 
of  a  railroad.     But  what  we  are  interested  in,  is  the 


84      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

spirit  of  the  control   provisions,  and  not   their  word- 
ing. 

The  political  and  military  character  of  the  railway  is 
manifested  in  the  railroad  police,  or  so-called  railroad 
guards.  These  were  Russian  soldiers  and  they  formed 
a  small  army.  These  guards  and  the  so-called  railroad 
"zones,"  i.e.,  lands  granted  to  the  company  upon  wh".h 
settlements  were  established  under  Russian  administra- 
tions, will  be  an  object  of  our  investigation  at  a  later  occa- 
sion. 

As  a  further  support  of  our  contention  we  shall  quote 
Kent  once  more.  Referring  to  the  two  points  between 
which  the  railroad  was  to  run,  Kent  remarks :  "  In 
other  words,  permission  was  given  to  continue  the  Trans- 
Siberian  line  across  Manchuria  to  Vladivostok  instead 
of  following  the  more  circuitous  route  along  the  Amur, 
which  presented  almost  insurmountable  difficulties  to 
railroad  construction."  ^i  The  new  railway  through 
Chinese  terricory  is,  indeed,  nothing  else  than  part  and 
parcel  of  the  Trans-Siberian  Railroad,  which  is  owned 
and  controlled  by  the  Russian  Government.  Its  pur- 
pose is  mainly  strategical.  Such  is  at  least  the  opinion 
of  the  British  representative  in  China,  Sir  C.  MacDon- 
ald,  who  wrote  in  1898:  "The  Manchurian  Railway 
Concession  dates  from  1896.  As  is  well  known,  it  was 
obtained  as  recompense  for  help  given  in  securing  the 
"  See  Kent,  op.  cit,  page  48. 


-^..T-^jjj.jv-  -;       ;;--«,-  ,  ' 


RUSSIA 


8= 


retrocession  of  Liaotung.  .  .  .  The  concession  is  purely 
strategical."  " 

The  agreement  enabled  Russia  to  dispense  with  the 
originally  projected  line  along  the  north  bank  of  the 
Amur,  gave  the  Russians  the  permission  of  continuing 
the  T.  "s-Siberian  line  across  Manchuria  to  Vladivos- 
tok, and  also  prepared  the  way  for  further  extensions 
southwards.  In  other  words,  the  Manchurian  Railway 
enabled  Russia  to  dominate  the  whole  of  North  Man- 
churia. 

The  construction  of  the  Chinese  Eastern  Railway  was 
begun  in  1897.  Meanwhile  diplomacy  appears  to  have 
been  active  in  preparing  for  the  southern  extension  of 
the  line  towards  the  Gulf  of  Chili  in  order  to  secure  a 
post  which  should  be  free  from  the  disadvantage  which 
attached  to  Vladivostok  of  being  annually  icebound  for 
several  months.  Events  again  facilitated  and  hastened 
Russian  movements.  Germany  had  compelled  the  Chi- 
nese Government  to  give  a  lease  of  the  region  around 
Kiaochau  Bay  for  ninety-nine  years.  It  has  been  sug- 
gested that  China  was  under  promise  to  grant  Russia  a 
concession  in  the  Kiaochau  region,^^  and  that  Russia 
embraced  the  opportunity  of  the  grant  to  Germany  to 
insist  upon  a  lease  of  the  Liaotung  peninsula,  including 
the  harbor  and  fortress  of  Port  Arthur,  for  twenty-five 

«  See  "  China,"  No.  i,  1899,  Vol.  CIX,  No.  459,  Enclosure  2. 
23  See  below,  page  86. 


Ta^^ai 


86 


l-OKKIGX  FINANCIAL  CONTROL  IN  CHINA 


years,  and  upon  the  right  to  construct  a  railway  to  con- 
nect  Port  Arthur  with  the  Chinese   Eastern   Railway. 
The  lease  of  the  Liaotung  peninsula  was  gramed  on  .the 
27th  of  March,  1898.  including  the  right  to  build  a  rail- 
way connecting  Port  Arthur  with  Harbin,  and  another 
connecting    Talienwan    (later    Dalny    and    now    called 
Dairen  by  the  Japanese)  with  Newchvvang.^^    The  eighth 
clause  provided  for  a  branch  of  the  railway  southward: 
"  The  Chinese  Government  agree  that  the  principle  of 
the  permission  given  in  the  twenty-second  year  of  Kuang 
Hsu  (1896)  to  the  Manchurian  Railway  Company  for 
the  construction  of  a  railway  shall  now,  from  the  date  of 
signature,  be  extended  to  the  construction  of  a  branch 
line  from  a  certain  station  on  the  aforesaid  main  line 
to  Talienwan,  or,  if  necessity  requires,  the  same  prin- 
ciple shall  ]ie  extended  to  the  construction  of  a  branch 
line  from  the  main  line  to  a  convenient  point  on  the  sea- 
coast  n  the  Liaotung  Peninsula,  between  Yingtzu  (Nuo- 
chwang)  and  the  Yalu  River.     The  provisions  of  the 
agreement  of  the  8th  of  September.  1896.  between  the 
Chinese  Government  and  the  Russo-Chinese  Bank  shall 
be  strictly  observed  with  regard  to  the  branch  line  above 
mentioned.     The  direction  of  the  line  and  the  places 
it  is  to  pass  shall  be  arranged  by  Hsu-Ta-jen  and  the 
Manchurian  Railway  Company."     The  article  ends  with 
the  important  proviso  that  "this  railway  concession  is 
2*  See  Rockhill,  op.  cit.,  Nos.  9  and  10. 


'^_-«  -_   "I 


RUSSIA 


87 


never  to  be  used  as  a  pretext  for  encroachment  on  Chi- 
nese territory,  nor  to  be  allowed  to  interfere  with  Chinese 
authority,  or  interests."  Article  III  of  the  Additional 
Agreement,  signed  at  St.  Petersburg  on  the  7th  of  May. 
1898,  provides  that  the  terminus  of  the  line  should  \ie 
at  Port  Arthur  and  Talienwan.  It  is  further  agreed 
in  common  that  railway  privileges  in  districts  traversed 
by  this  branch  line  shall  not  be  given  to  the  subjects 
of  other  Powers. 

"  Russia  having  gained  her  points,  the  Russification 
of  the  country  proceeded  fast.  Port  Arthur  was  forti- 
fied, a  modern  town  built  at  Dalny,  and  railway  con- 
struction pushed  on.  The  line  was  now  divided  into 
three  sections :  the  Western,  from  the  Siberian  frontier  to 
Harbin;  the  Eastern,  from  Harbin  to  Vladivostok;  and 
the  Southern,  consisting  of  the  branch  from  Harbin  to 
Port  Arthur.  The  paramount  importance  of  the  last- 
named,  in  Russian  eyes,  was  soon  made  manifest,  for 
though  the  eastern  and  western  section  received  merely 
ordinary  attention,  the  Port  Arthur  branch  was  pushed 
on  with  the  utmost  dispatch.  .  .  .  The  gauge  adopted 
for  the  line  was  five  feet,  the  Russian  standard,  which 
was  especially  stipulated  for  in  the  agreement  in  order 
that  it  might  be  uniform  with  the  Trans-Siberian  Road. 
So  rapidly  was  the  work  pushed  on,  that  by  the  time  of 
the  Boxer  outbreak  the  line  was  almost  through."  *' 
*'  See  Kent,  op.  cit.,  page  50.  , 


■•  V  ♦■?>■-•  *l-'!hS-: 


88 


FOkKIGN  FIXANCIAL  CONTROL  IN  CHINA 


The  railway  could  be  opened  to  traffic  in  1901.  "  Con- 
trol "  over  the  road  is  absolutely  identical  to  that  over 
the  North  Manchurian  line.  For  the  railway  is  merely 
a  branch  line  of  the  Chinese  Eastern  Railway,  and  is  thus 
subject  to  all  the  agreements  referring  to  the  latter,  as 
explicitly  stipulated  in  Article  8  of  the  mvention  of 
March  .'7,  ,898.  The  whole  Manchuru..  Railway 
places  Russia  in  the  possession  of  a  direct  route  to 
Peking  and  at  once  gives  her  a  predominance  in  North- 
ern China,  which  places  other  powers  at  a  marked  dis- 
advantage. 

It  was  especially  the  British  colony  ir.  China  that  was 
worried  about  Russia's  activity  in  the  north.  The  China 
Association  wrote  on  April  14,  1898,  to  Lord  Salisbury: 
"  The  Association  feels  no  confidence  that  the  door  of 
Manchuria  will  be  left  open  by  the  Great  Power  which 
has  obtained  possession  of  lock,  bolt,  and  bar.  An  ice- 
free  port  %\as  a  necessary  concession  to  its  commercial 
needs.  The  fact  that  that  port  has  taken  the  form  of 
a  fortress,  which  can  be  rendered  practically  impreg- 
nable, violently  changes  the  situation.  '  2« 

But  it  is  also  important  to  notice  the  Russian  point  of 
view.  In  an  Official  Communication  of  the  Russian  Of- 
ficial Messenger  of  March,  1898,  we  >ead  in  reference 
to  the  lease  of  Port  Arthur  and  the  Russian  railway 
rights  in  Manchuria :  "  This  Agreement  is  a  direct  and 
^•See  "  China."  No.  i,  1899.  Vol.  CIX,  No.  25. 


1. 


i 


RUSSIA 


89 


natural  outcome  of  the  friendly  relations  between  great 
neighlwring  Empires,  all  of  whose  endeavors  should  be 
directed  towards  the  preservation  of  tranquillity  along 
the  vast  extent  of  their  neighboring  possessions  for  the 
common  beneiit  of  the  people  of  both  of  them.  ,  .  . 
Securing  the  inviolability  of  the  sovereign  rights  of 
China,  and  satisfying  the  daily  requirements  of  Russia 
in  her  capacity  of  a  great  and  neighboring  naval  Power, 
this  Agreement  can  in  no  way  injure  the  interests  of  anv 
other  Power;  on  the  contrary,  it  gives  to  all  nations  . 
the  world  the  possibility  in  the  near  future  of  entering 
into  communication  with  this  hitherto  closed-up  country 
on  the  coast  of  the  Yellow  Sea."  " 

English  objections  to  Russia's  Manchurian  enterprises 
were  severely  criticized  by  the  Russian  Press,  to  judge 
from  e.xtracts  given  in  the  British  Blue  Books.'*  The 
Novosti  says  for  instance  that  "  Russia's  recent  action 
in  the  Far  East  meets  vvith  the  sympathy  of  all  countries 
excepting  England.  This  shows  how  thoroughly  the 
majority  of  foreign  Powers  believes  in  the  sincerity  of 
Russia's  desire  for  peace.  England,  who  always  op- 
posed Russia's  lawful  aspirations,  would  obstruct  her 
now  were  she  not  happily  isolated.  ...  At  present  Eng- 
land is  helpless  before  Russia,  because  the  latter  is  sup- 
ported by  France  and  Germany.     There  is  no  fonr"1 

«■  See  "  China,"  No.  i,  1899,  Vol.  CIX,  No.  i. 

"See  "China,"  No.  i,  1899,  Vol.  CIX.  No.  14.  Enclosures. 


90      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

agreement  between  these  three  Powers,  but  there  is  a 
complete  sohdarity  between  them." 

England's  isolation  mentioned  here,  led  eventually  to 
the    conclusion   of    the    Anglo-Japanese    alliance.     But 
meantime  the   Russian  and  English   Governments  had 
long  discussions  in  reference  to  railway  enterprises  in 
.Manchuria.2»     The  British  and  Chinese  Corporation  had 
entered  into  a  preliminary  agreement  with  the  Chinese 
Government  on  the  7th  of  June.  1898.  for  a  sterling  loan 
of    16,000.000  taels   "  for   the  construction  of  a   rail- 
way-line  from  Chunghowsou  to   Hsinmintung.  and  a 
branch  line  to  Ying-tzu,  and  for  the  redemption  of  ex- 
isting loans  to  the  Tientsin-Shanhaikwan  and  Tientsin- 
T^ukouchiao  lines.     The  security  for  the  loan  shall  be  the 
permanent  way.  rolling-stock,  and  entire  property. 
In  the  event  of  default  or  arrears  in  payment  of  interest 
or  repayments  of  principal,  the  said  railway  lines  . 
shall  be  handed  over  to  representatives  deputed  by  the 
Syndicate,  to  manage  them  on  their  behalf,  until  prin- 
cipal and  interest  of  the  loan  are  redeemed  in  full,  when 
the  management  will  revert  to  the  Railway  Administra- 
tion." "o     Whereupon    the    Russian    Repre  entative    in 
China  protested  against  the  arrangement,  and  especially 
against  the  provision  of  British  control  in  case  of  de- 
fault.    A    long  series   of   negotiations    followed,    until 

Z  c  '^^u"''?'^  account  of  these  is  given  by  Kent,  op.  cit..  pages  51  flF 
^°  bee  Hockhill,  op.  cit.,  No.  42. 


'itsssiasKmv-::^! 


RUSSIA 


91 


finally  a  compromise  was  reached,  which  is  expressed  in 
Article  4  of  the  final  agreement  of  Oct.  10,  1898." 
"  This  arrangement,  which  differs  from  other  contracts 
in  that  the  Administrator-General  retains  control  of  the 
railway  lines  so  long  as  the  principal  and  interest  of  this 
loan  are  regularly  paid,  has  been  agreed  to  in  consequence 
of  the  friendly  relations  which  have  long  existed  betwee:i 
the  Contracting  Parties."     Sic! 

The  ultimate  outcome  of  the  Russo-British  negotia- 
tions was  the  official  recognition  of  the  respective 
"  spheres  of  interest  "  as  quoted  in  Chapter  II.  A  sup- 
plementary note  recorded  the  understanding  arrived  at 
in  respect  to  the  Shanhaikuan  Xewchwang  section  of  the 
Imperial  Railways  of  North  China. 

While  Russia  thus  excluded  England  from  railway 
participation  in  her  sphere,  England  was  not  able  to 
exclude  Russia  entirely  from  hers.  It  had  been  Russia's 
great  desire  to  secure  control  of  a  railway  from  the  north 
which  would  join  with  a  line  from  Indo-China,  and  to 
establish  a  through  trunk  route  bisecting  China  and  under 
control  of  Russia  and  her  ally  France.  But  bound  by 
the  agreement  with  England,  she  could  only  accomplish 
her  ends  through  the  medium  of  a  third  party.  This 
Russia  apparently  did  by  entrusting  her  interests  to  oth- 
ers.    She  retired  into  the  background,  and  confided  the 

"  The  correspondence  between  the  British  and  Russian  Govern- 
ments with  regard  to  Railway  interests  in  Manchuria  are  contained 
in  "China,"  No.  2,  1899,  Vol.  CIX. 


I: 

ifi. 


m 


92      FOREIGN  FINANCIAL  CONTROL  IN  CHP^A 

active  work  of  advancing  her  interests  to  her  allies  and 
financial  agents,  France  and  Belgium. 

In   1897  a  Belgian  syndicate  obtained  a  concession 
for  a  line  from  Peking  to  Hankow.     The  hand  of  Rus- 
sia  in   the   negotiations   was   clearly   seen.     In   Article 
18  32  it  was  stipulated  that  the  Russo-Chinese  Bank  would 
be  the  agent  for  the  bonds,  and  Article  20  provided  that 
the  Russo-Chinese  Bank  should  be  the  bank  of  deposit 
and  the  medium   for  monthly  payments.     The   British 
-."ovemment  soon  realized  the  significance  of  the  E..,gian 
venture  and  did  not  entertain  any  illusions  as  to  the 
real  character  of  the  Belgian  concessions.     At  the  time 
the  agreement  was  ready  to  be  signed.  Sir  Claude  Mac- 
Donald  raised  the  strongest  objection.^s     His  principal 
criticism  of  the  contract  was  that  there  was  no  security 
against  the  railway's  transfer  to  a  bank  or  syndicate 
of  another  nationality  (namely  Russian),  that  there  is 
withdrawn  from  Chinese  control  all  concern  with  the  con- 
struction of  the  line,  and  all  power  of  interference  with 
the  selection  of  the  employees  and  the  fixing  of  the  rates 
and  that  the  Russian  Minister,  together  with  the  French 
and  Belgian,  was  to  be  the  judge  in  certain  disputes; 
while  his  principal  objection  was  directed  against  any 
participation  of  the  Russo-Chinese  Bank.^*     Any  British 
objection,  however,  proved  to  be  without  avail,  for  China 

"  See  Rockhtll,  op.  cit.,  No.  14 

«» See  Chapter  II. 

»«  See  "  China,"  No.  i,  iSgg,  Vol.  CIX,  No.  347. 


i 


RUSSIA 


93 


seemed  to  have  been  determined  and  Russian  pressure 
seemed  to  have  been  stronger  than  British  demonstra- 
tions. 

The  arrangement  was  embodied  in  two  documents,  a 
loan  contract  and  an  operating  contract.^'     The  latter 
confers  wide  powers  of  management  upon  the  syndicate, 
and  gives  them  complete  financial  control  of  the  line. 
Article  I  provides  as  follows :     "  The  Chinese  Railway 
Company    (represented   by  the   Viceroys  of   Chili   and 
Hupeh)   in  accord  with  the  Imperial  Chinese  Govern- 
ment, entrusts  the  Societe  d'fitude  de  Chemins  de  Fer  en 
Chine  (the  Belgian  syndicate)  which  shall  appoint  rep- 
resentatives for  that  purpose,  with  the  direction,  adminis- 
tration, and  operating  of  the  line  from  Hankow  to  Pe- 
king."    According  to  Article  II,  "  The  Societe  d'fitude- 
or  the  representatives  of  it  shall  appoint  .  .  .  shall  or- 
ganize the  various  services,  shall  have  the  right  to  hire 
the  personnel,  whicii    t  shall  have  absolute  right  to  dis- 
miss, or  disband,  and  to  fix  its  salaries  according  to  a 
fixed  schedule  previously  communicated  to  the  Director 
General   of   the   Chinese   Railway   Company.     It   shall 
make  all  purchases  necessary  for  operating,  maintaining 
or  repairing  the  road,  it  shall  fix  the  schedule  of  rates  in 
the  terms  of  concession  contracts,  collect  revenues  of  all 
kinds  and  pay  the  operating  and  management  expenses 
of  the  Company." 

*'  See  Rockhill,  op.  cit.,  No.  34. 


94      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

The  loan  itself  is  secured  by  a  mortgage  on  the  railway, 
rolling  stock,  etc.  In  short,  the  control  provisions  are 
in  substance  identical  to  those  embodied  in  the  English 
contracts;  for  we  have  to  remember  that  the  English 
control  provisions  were  explicitly  shaped  after  the  Belgian 
contract.^"  In  other  words,  the  Belgian  control  pro- 
visions are  financial  in  nature.  Yet  their  ultimate  po- 
litical purpose  can  hardly  be  denied. 

Later  railways  contracted  or  earmarked  by  the  Bel- 
gian syndicate  tended   further  to  strengthen  England's 
suspicions  of  Russia's  political  aim  .     "  The  significant 
point  is,"  says  the  Far  Eastern  Retnezv,  "  that  the  last 
performance  of  this  Company  brings  into  efifect  the  iden- 
tical scheme  which  the  Russians  long  ago  cherished  to 
obtain  railway  domination  in  certain  spheres  in  China."  3' 
The  lines  referred  to  as  secured  by  the  Belgian  company 
are  a  continuation  of  the  Trans-Caspian  System  of  Rus- 
sia through  Sinkiang  (Chinese  Turkestan)  and  Kansu, 
and  leading  from  Lanchow  to  Sian,  Honan,  Kaifeng  to 
the  sea.     The  other  Belgian  project  is  a  line  longitud- 
inally through  the  province  of  Shansi  and  is  to  connect 
the  above  mentioned  line  with  the  Peking-Kalgan  exten- 
sion, a   Russian  venture,  at  Tatungfu.     The  company 
has  the  option  to  extend  this  railway  in  the  south  to 
Chengtu,  the  capital  of  Szechuan. 

"•  See  Chapter  II. 

»T  See  "  Far  Eastern  Review,"  Vol.  lo,  pages  02  and  290. 


RUSSIA 


95 


- 


To  this  the  Far  Eastern  Reznew  remarks :     "  No  rail- 
ways in  China  are  Hkely  to  have  such  an  important  bear- 
ing, however,  upon  the  poHtical  future  of  the  country  as 
these  two  routes  which  have  now  come  under  the  dom- 
inance   of    the    Belgian    financial    organization.     Apart 
from  its  political  bearing,  however,  the  projected  rail- 
way will  place  in  the  hands  of  the  Belgian  syndicate 
the  greatest  amount  of  mileage  held  by  any  individual 
nation  in  China,  and  the  two  routes  will  embrace  an 
area  of  country  of  tremendous  importance  to  Russia, 
whose  financiers  are  alleged  to  be  interested  in  the  Com- 
pagnie  Generale  de  Chemins  de  Fer  et  de  Tramways  en 
Chine.     Considered  from  a  purely  economic  standpoint 
the  proposed  line  is  likely  to  have  a  tremendous  influ- 
ence upon  the  development  of  one  of  the  richest  mineral- 
bearing  provinces  of  China."  ^^ 

Our  discourse  on  the  Belgian  schemes,  though  ap- 
parently a  diversion  from  our  theme,  was  to  illustrate 
Russian  political  designs  in  the  Far  East.  Aside  from 
the  improbability  of  an  early  construction  of  these  rail- 
ways as  a  result  of  the  war,  and  a  consequent  lack  of 
practical  value,  the  fact  that  the  text  of  the  agreements 
was  not  available  to  the  author  makes  it  inadvisable, 
if  not  impossible,  to  go  into  further  details. 

The  political  character  of  Russian  railways  in  China, 
at  least  previous  to  the  Russo-Japanese  War,  is  most  ap- 
3«  Sec  "  Far  Eastern  Review,"  Vol.  lo,  page  89. 


96      FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 

parent  in  Manchuria.     Here  events  were  favorable  for 
turther  attempts  at  advance.     In   1900  the  Boxer  dis- 
turbances threw  the  whole  of  North  China  into  chaos; 
and    Russia    immediately    occupied    Manchuria,    osten- 
sibly to  secure  the  maintenance  of  order.     Newchwang 
and  Mukden  were  occupied  and  a  military  occupation 
was  regularly  instituted  along  the  whole  Russian  railway 
m  Manchuria.=^«    Any  intentions  of  a  Russian  occupation 
however  were  repeatedly  denied  by  the  Russian  minis- 
ter to  China.-o     Nevertheless  Europe  continued  to  be 
alarmed  at  Russian  activities  and  the  Anglo-German  con- 
vemion  of  Oct.  16,  1900,  was  a  direct  outcome  of  the 
Manchurian  situation.* »     Its  main  object  was  to  restrain 
any  power  which  might  be  disposed  to  violate  the  prin- 
ciple of  equal  opportunity  in  China  or  her  territorial 
integrity. 

Meanwhile  the  Powers  were  occupied   with   settling 
the  questions  arising  out  of  the  Boxer  rebellion      After 
the  legations  had  been  relieved  by  the  international  ex- 
peditionary  force,   the   Powers  proceeded   to  negotiate 
with  Chma  upon  the  terms  imder  which  they  would  evac- 
uate Peking.     Until  a  general  treaty  was  concluded  be- 
tween China  and  the  cooperating  Powers,  it  was  obvious 
that  It  would  be  at  least  inappropriate  for  any  individual 
power  to  seek  to  negotiate  a  separate  treaty  with  China. 

-See  -"rJ-"''."  S°-   ''   ''^''  ^'°'-  XCI.  No.  391. 

"  i::  Ro?s.  ::jcz^''  ^°^-  ^^'  ^^^'  -^  -'-^- 


RUSSIA 


97 


But  early  in  1901  the  news  came  out,  of  a  draft  of  an 
agreement  into  which  China  was  supposed  to  have  en- 
tered with  Russia  respecting  Manchuria.  At  the  inquiry 
by  Japan  and  England  of  the  Russian  and  Chinese  Gov- 
ernments as  to  the  existence  of  the  alleged  convention, 
both  governments  kept  a  strict  silence.  Whereupon 
China  was  warned  by  Great  Britain,  Germany,  Japan 
and  the  United  States  against  entering  into  a  separate 
agreement  with  one  power  while  it  was  negotiating  for 
peace  with  all  powers  collectively.'*-  Strongly  pressed 
by  the  powers,  China  finally  communicated  the  text  of 
the  agreement  and  asked  immediately  thereafter  the  re- 
spective Foreign  Offices  to  mediate  between  her  and 
Russia.*^ 

The  principal  terms  of  the  Agreement  were:  **  Man- 
churia to  be  restored;  Assistance  to  be  given  to  China 
by  Russia  in  keeping  order;  No  army  to  be  maintained 
by  China  until  the  completion  of  the  Manchurian  rail- 
way. The  strength  of  the  p'^lice  is  to  be  settled  with 
Russia;  they  are  not  to  possess  artillery,  and  no  for- 
eigners other  than  Russians  are  to  be  employed  in  it; 
Abolition  of  Chinese  administration  in  the  town  of  Chin- 
chou.  China  is  not  to  grant  any  mining,  railway  or 
other  rights  without  the  permission  of  Russia  in  the  ter- 
ritory upon  the  Russian  border,  i.e.,  Manchuria,  Mon- 

«*  See  "  China,"  No.  6,  1901,  Vol.  CXI,  Nos.  79  and  106. 
«  See  "  China."  No.  6,  igri,  Vo).  CXI,  No.  137. 
** See  "China,"  No.  6,  1901.  Vol.  CXI,  No.  130. 


98      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 
golia,  Hi,  Yarkand,  etc.,  and  Russia's  permission  is  to 
be  obtamed  before  China  builds  railways  in  these.     With 
reference  to  the  damages  suflfered  by  the  Manchurian 
Railway  these  shall  be  made  good.  .  .  .  Instead  of  this 
concessions  may  be  accepted  or  existing  cotUracts  modi- 
fied.    Until  the  last  provisions  are  carried  out.  Russia 
will  -namtain  an  additional  force  for  the  protection  of  the 
Manchurian  Railway ! 

This  agreement  shows  l>etter  than  anything  else  the 
true  ambitions  of  Russia  in  the  Far  East  and  the  kind 
of  control  she  desired  to  exercise -if  it  had  not  been 
for  Japan.     Russia's  duplicity  during  and  after  the  Boxer 
troubles  may  be  illustrated  by  a  quotation  from  Putnam 
\Veale:     "During  1901,  Russia  had  three  distinct  and 
separate  roles  to  play  in  China:  the  part  of  ally  to  all 
t-urope;  the  part  of  China's  dear  and  secret  friend  in 
lekmg:  and  the  part  of  Manchuria's  real  master  in  the 
mvaded  provinces;  whilst  over  and  above  in  Europe  she 
had  to  quiet  the  secret  fears  of  numerous  Chancelleries 
busily  inquiring  as  to  her  real  plans  in  the  future  "  « 

Backed  by  the  support  of  the  Powers,  China  refused 
to  sign  and  Russia  withdrew  temporarily.*'     Then  fol 
lowed  the  Anglo-Japanese  alliance;  whereupon   Russia 
modified   her  demands   in   respect  to   Manchuria.     On 
Apnl  8.  1902.  an  agreement  was  concluded  between  Rus- 

"  See  'Xhlnr-^M"''.'  "  ^"'\^P'"^  ''f  "^^  I^-  East."  page  263 
see     China,    No.  6,  1901,  Vol.  CXI,  No.  238. 


RUSSIA 


99 


sia  and  China  containing  the  following  principal  terms." 
Manchuria  was  to  be  restored  to  the  Chinese  Govern- 
ment; bin  China  was  to  observe  strictly  the  stipulations 
of  the  contract  concluded  with  the  Russo-Chinese  Bank 
in  1896,  Russia  was  to  withdraw  her  troops  gradually 
fronj  Manchuria.  Russia  agrees  to  restore  to  the  own- 
ers the  Railway  Shanhaikuan-Newchwang-Sinmintung. 
No  other  Power  shall  be  allowed  to  participate  in  this 
railroad  in  any  form  nor  to  occupy  the  territory  evacu- 
ated. Should  extension  of  the  line  be  contemplated, 
the  Russian  Government  was  to  be  consulted  first;  ex- 
penses for  repair  and  working  of  said  line  were  to  be  paid 
by  China. 

The  Russians  did  not  observe  these  terms  faithfully; 
on  the  contrary,  they  established  themselves  more  firmly 
at  the  mouth  of  the  Liao  River.**  The  diplomacy  of 
Russia  was  accompanied  by  hurried  exploitation  on  the 
part  of  Russian  speculators  of  the  valuable  timber  re- 
gion of  the  Yalu  River,  by  encroachments  upon  Korea, 
and  by  enormous  expenditures  at  Dalny,  which  the  Rus- 
sians destined  for  a  great  port.  In  these  adventures 
and  in  the  neglect  of  military  precautions,  Russia  was 
simply  playing  the  game  of  Japan  and  hastening  the  mo- 
ment when  this  Power  was  to  take  over  Russia's  railway 
rights  in  South  Manchuria. 

*!  See  •'  China,"  No.  2,  1904,  Vol.  CX,  page  36  ff.    See  also  Rock- 
hill,  op.  cit.,  No.  17. 
"  See  "  China,"  No.  2,  1904,  Vol   CX,  page  63. 


lOO 


FORKIGX  FINANCIAL  CONTROL  IN  CHINA 


The  Trenty  of  Portsmouth  of  Aug.  23rd.  1905,  de- 
prived Russia  of  the  southern  part  of  the  Manchurian 
Railway."    Article  VI  .says:     "  The  Imperial  Russian 
Government  engages  to  transfer  and  assign  to  the  Im- 
perial Government  of  Japan,  without  compensation  and 
with  the  assent  of  the  Chinese  Government,  the  railway 
between  Changchun   (Kuanchengtzu)   and  Port  Arthur 
and  all  its  branches  together  with  all  rights,  privileges, 
and  properties  appertaining  thereto  in   that  region,  as 
well  as  all  coal  mines  in  the  said  region  belonging  to  or 
worked  for  the  benefit  of  the  railway."—  The  consent  of 
the  Chinese  Government  was,  of  course,  forthcoming.— 
According  to  article  VII  Japan  and  Russia  engage  to  ex- 
ploit their  respective  railways  in  Manchuria  "  exclusively 
for  commercial  and  industrial  purposes  and  in  no  wise 
for  strategic  purposes."     Article  III  sJpt-'ates :     "  Japan 
and  Russia  mutually  engage,  (i)  To  evacuate  completely 
and  simultaneously  Manchuria  except  the  territory  af- 
fected by  the  lease  of  the  Liaotung  Peninsula,  in  con- 
formity with  the  provisions  of  additional  Article  I  an- 
nexed to  this  Treaty;  and  (2)  To  restore  entirely  and 
completely  to  the  exclusive  administration  of  China  all 
portions  of  Manchuria  now  in  the  occupation  or  under 
the  control  of  the  Japanese  or  Russian  troops,  with  the 
exception  of  the  territory  above  mentioned.     The  Impe- 
rial Government  of  Russia  declares  that  they  have  not 
«  See  "  British  and  Foreign  State  Papers,"  Vol.  98,  pa^e  735. 


St' 


/ 


RUSSIA 


loi 


in  Manchuria  any  territorial  advantages  or  preferential  or 
exclusive  concessions  in  »mpairment  of  Chinese  sover- 
eignty or  inconsistent  with  the  principle  of  equal  oppor- 
tunity." And  in  Article  V:  "The  Imperial  Russian 
Government  transfers  and  assigns  to  the  Imperial 
(iovernmment  of  Japan,  with  the  consent  of  the  Gov- 
ernment of  China,  the  lease  of  Port  Arthur,  Talien,  and 
adjacent  territory  and  territorial  waters  and  all  rights, 
privileges,  and  concessions  connected  with  or  forming 
part  of  such  lease,  and  they  also  transfer  and  assign  to 
the  Imperial  Government  of  Japan  all  public  works 
and  properties  in  the  territory  aflfected  by  the  above- 
mentioned  lease." 

In  other  words,  the  Treaty  of  Portsmouth  deprived 
xvussia  of  her  strategical  stronghold  in  South  Manchuria, 
of  her  railway  rights  in  said  region,  and  checkf  '  any 
possible  Russian  ambitions  at  political  control  of  all 
Manchuria.  Russian  control  in  the  Russian  "  sphere  " 
i.e.,  in  North  Manchuria,  could  therefore  —  legally  — 
be  based  exclusively  upon  the  railway  agreements  be- 
tween the  Russo-Chinese  Bank,  respectively  the  Chinese 
Eastern  Railway  Company  and  the  Chinese  Government. 
The  control  provisions  have  been  analyzed  above  and  the 
character  and  degree  of  control  been  stated.  Two  as- 
pects of  Russian  control  in  Manchuria,  however,  re- 
main to  be  investigated:  the  railway  guards  and  the 
railway  zones.     As  to  the  first  point  the  writer  has  to 


IO> 


l()RKI(;\  FIXAXCIAK  {  OXTKOI.  IX  CMIXA 


acknowledge  his  inability  to  secure  accurate  figurrs  as 
to  the  number  of  soldiers  employed.     The  amount  has 
Ijcen  constantly  varying  and  the  figures  found  in  the  liter- 
ature appear  most  unreliable.     The   figure  is  large  or 
small  according  to  the  sympathies  or  antipathies  of  the 
writers.     The  supplementary  agreement  to  the  Trea.^  of 
r-rtsmouth  provides,  that  "  within  a  period  of  eighteen 
months  from  that  date  (i.e..  immediately  after  the  Treaty 
oi  Peace  comes  into  operation)  the  armies  of  the  two 
countries  shall  he  completely  withdrawn  from  Manchuria 
except  from  the  leased  territory  of  the  Liaotung  Penin- 
sula." 

The  Russian  title  to  railway  "  zones  "  in  North  Man- 
chiiria  is  based  upon  Article  VI  of  the  Russo-Chinese 
I'ank's  treaty  with  China  of  Sept.  8.   1896.="     The  re- 
spective phrases  read  as  follows:     "  As  regards  the  land 
required  by  the  Company   fur  constructing,  managing, 
and  protecting  the  line  and  adjacent  land,  ...  it  will 
be  given  the  Company  without  payment.  ...  As  soon  as 
the  land  conies  under  the  management  of  the  Company, 
they  may  erect  thereon  any  buildings  and  carry  on  all 
kinds  of  work."  .  .  .  Lawton,  however,  informs  us  th.-.t 
the  French  text  reads  quite  differently:     "La  Societe 
aura  le  droit  absolu  et  exclusif  de  ladministration  de  les 
terrains." -'x     On  the  strength  of  these  clauses,  Russia 

^^  See  Rockhill,  op.  cit.,  No.  -52 

■•>  See  Lawton.  "Empires  of  We  Far  East,"  Vol.  I,  page  1303. 


RUSSIA 


>03 


founded  townships  such  as  Harbin  and  Tsitsihar,  which 
were  under  Russian  administration,  together  with  all 
other  settlements  and  all  the  extensive  tracts  of  lands  held 
by  the  Company.  China  objected  to  the  extensive  ad- 
ministrative powers  exercised  by  Russia,  until  the  dispute 
was  Finally  settled  by  an  a^^reement  of  May  loth,  1909. 

According  to  Harrison,  "  The  last  agreement  between 
the  Russian  and  Chinese  Governments  arose  out  of  the 
protest  of  the  Chinese  Government  against  that  part  of 
the  1896  Treaty  which  bears  upon  the  introduction  of 
public  administration  in  Harbin  and  other  settlements  of 
the  railway  zone.  In  a  strictly  legal  sense,  China  had  a 
very  weak  case,  and  Russia's  consent  to  the  new  arrange- 
ment was  in  the  nature  of  a  concession,  but  one  which  is 
to  be  welcomed  as  creating  a  wholesome  precedent  in  the 
direction  of  a  wider  recognition  of  China's  sovereign 
rights  v.ithin  her  own  territory,  the  true  reason  for  the 
original  grant  of  special  privileges  being  plain  enough."  " 

The  agreement  is  simply  an  appendix  to  the  railway 
agreement  of  1896.  To  use  the  text,"''  "  In  view  of 
the  mutual  misunderstandings  which  have  arisen  in  the 
interpretation  of  the  contract  for  the  construction  and 
working  of  the  Chinese  Eastern  Railway,  dated  27th 
of  August,  1896,  on  consideration  of  the  question  of 
the  organization  and  introduction  of  public  administra- 

"See  Harrison,  "  Peace  or  War  East  of  Baikal?"  page  199. 
"  See  "  British  and  i'""oreign  State  Papers,"  Vol.  102,  page  396. 


^^^g^ggy^T^pr     -TT^Pi^ 


104      FORKKiX  FINAXCIAL  CONTROL  IX  CHINA 
tion  on  the  lands  of  the  Railway,  the  Governments  of 
Russia  and  China  have  established  the  following  general 
rules  : 

I.  On  the  lands  of  the  Chinese  Eastern  Railway,  as  a 
fundamental  principle,  are  recognized  the  sovereign 
rights  of  China,  which  must  not  be  prejudiced  in  any 
way. 

2.  All  sovereign  rights  of  China  on  the  lands  of  the 
Chmese  Eastern  Railway  are  exercised  by  China,  and 
tie.ther  the  administration  of  the  Railway  nor  public 
admm.strations  shall  under  any  pretext  obstruct  the  ex- 
ercise of  these  rights,  if  such  do  not  infringe  any  of  the 
treaties  uhich  have  been  concluded  by  the  Chinese  East- 
ern Railway  Company. 

3.  All  the  treaties  of  the  Chinese  Eastern  Railway  at 
present  in  operation  remain  as  before  in  full  force. 

6.  On  the  lands  of  the  Chinese  Eastern  Railway  Com- 
pany in  settlements  which  possess  commercial  import- 
ance public  administration  .hall  be  formed.     The  inhab- 
itants of  these  settlements,  in  conformity  with  the  com- 
mercal  importance  of  a  given  settlement  and  the  numl)er 
of  Its  population,  shall  elect  delegates  who.  in  their  turn 
shall  Choose  an  Executive  Committee,  or  the  inhabitants 
themselves  shall  directly  superintend  public  affairs  and 
elect   from  their  number  one  representative  who  shall 
carry  into  effect  the  resolutions  of  the  general  assembly. 
7.  On  the  lands  of  the  Chinese  Eastern  Railway  Com- 


y»i:^  %i*^i?:^.:*:.  ..^^ii*^^. •_•-)?  j;'==k^ 


'^i  '■ 


I 


RUSSIA 


loS 


pany,  both  the  Cliinese  and  foreign  population  enjoy 
the  same  rights  and  assume  the  same  obHgations,  without 
the  slightest  difference  between  them. 

8.  vll  inhabitants  who  own  a  certain  amount  of  im- 
•-■ovable  property  or  pay  a  certain  annual  rental  and 
established  taxes  enjoy  the  right  of  participation  in  the 
election  of  delegates. 

9.  The  President  is  elected  by  the  Assembly  of  Dele- 
gates from  their  midst,  irrespective  of  nationality. 

10.  All  matters  which  concern  the  management  and 
good  order  of  the  settlements  are  subject  to  the  jurisdic- 
tion of  the  Assembly  of  Delegates,  etc.,  etc. 

11.  The  Assembly  of  Delegates  elects  from  its  midst, 
irrespective  of  nationality,  members  of  the  Executive 
Committee.  Their  number  must  not  be  more  than  three. 
Besides  this,  the  President  of  the  Tsiao-she-tsui  (Chi- 
nese Raihvay  Bureau)  and  the  President  of  the  Railway 
appoint  one  delegate  each.  The  members  of  election  and 
the  delegates  together  with  their  President  constitute 
the  Executive  Committee. 

12.  The  President  o  the  Assembly  of  Delegates  is 
at  the  same  time  President  of  the  Executive  Commit- 
tee. 

13.  The  President  of  the  Tsiao-she-tsui  and  the  Pres- 
ident of  the  Railway,  occupying  a  position  higher  than 
that  of  the  President  of  the  iVssembly  of  Delegates  and 
Executive  Committee,  are  invested  with  the  power  of 


^:..       ^     ^" 


I06     FOREIGX  FIXANCIAL  CONTROL  IN  CHINA 
control  and  the  right  of  personal  revision,  which  they 
exercse  when  this  is  deemed  to  be  indispensable,  etc., 

14.  In  the  event  of  the  disagreement  of  the  President 
of  the  Ts>ao-she-tsui  or  the  President  of  the  Railway 
w:th  the  resolutions  of  the  Assembly  of  Delegates,  these 
must  be  transferred  to  the  Assembly  for  additional  inves- 
tigation. Its  resolution  shall  be  deemed  binding  if  it  is 
passed  by  three-fourths  of  the  votes  of  members  present 
at  the  sittmg  of  the  Assembly. 

15.  Important  public  and  financial  questions  arising  in 
the  settlements  of  the  expropriated  Zone  of  the  Railway 
on  consideration  by  the  Assembly  of  Delegates,  are  trans-' 
ferred  to  the  President  of  the  Tsiao-she-tsui  and  to  the 
admm.stration  of  the  Chinese  Eastern  Railway  for  joint 
consMeration  and  confirmation. 

16.  Lands  which  have  been  allotted  specially  for  the 
needs  of  the  Railway  are  subject  to  the  independent  con 
trol  o    the  Chinese  Eastern  Railway,  i.e.,  L  station, 
workshops,  and  so  forth,  etc. 

In  commenting  in  a  very  favorable  way  upon  ,he 
prov,s,ons  of  this  agreement  as  no.  estabUshing  special 
nv,.eges  for  R.sia  and  as  not  being  materially  differen 
from  the  pnv.leges  enjoyed  in  any  other  international 
settlements  such  as  Tientsin,  Shanghai  and  others,  Har 
n.so„  says :    "  The  Russian  position  is  made  all  th   more 
.^pregnable  .n  the  light  of  the  perfect  freedom  which 


mumpsmt&^^^mi^^ssmi^^i^^bm^jL 


■-(W 


RUSSIA 


107 


every  other  Power  enjoys  to  establish,  if  it  so  wishes, 
its  own  settlements  at  Harbin.     Hitherto,  however,  no 
effort  has  apparently  been  made  to  take  advantage  of 
this  right,  and  all  foreigners,  with  singular  unanimity, 
prefer    to    live    in    the    Russian    settlement.""     And 
further:     "Happily,    it  now   seems   probable   that   the 
Powers  will  yield  on  the  point  of  municipal  adminis- 
tration, it  being  clearly  stipulated  on  Russia's  part  that 
she  does  not  claim  any  right  of  legal  jurisdiction  over  the 
persons  of  foreign  subjects  resident  in  the  Russian  set- 
tlement of  Harbin  or  elsewhere  within  the  railway  zone. 
Extraterritoriality  obtains  at   Harbin,   as   it  does  else- 
where throughout  China,  and  though  the  Russian  police 
may  arrest  a  foreigner  caught  in  flagrante  delicto,  they 
must  at  once  surrender  him  to  his  consul  for  trial."  " 

Extraterritoriality  and  th.  -gal  status  of  interna- 
tional settlements  however  are  not  the  object  of  our 
investigation.  We  have  given  a  lengthy  quotation  from 
the  latest  Russo-Chinese  railway  zone  agreement  to  prove 
our  contention  that  the  post-bellum  control  exercised  by 
Russia  in  China  is  —  legally  —  non-political.  Though 
Russia  may  or  may  not  have  had  an  ultimate  absorption 
of  North  Manchuria  in  view,  the  Russian  control  exer- 
cised in  North  Manchuria  is  strictly  based  upon  the  rail- 
way agreements  including  the  supplementary  interpreta- 

['*  See  Harrison,  op.  cit.,  page  201. 
^^  See  Harrison,  op.  cit.,  page  204. 


VJ 


ro8      FOREIGX  FIXANCIAL  COXTROL  IX  CHIXA 

tion  of  the  agreements  to  be  found  in  the  agreement  of 
1909. 

"  The  spirit  which  animated  the  Russian  side  of  the 
negotiations  for  the  agreement  concluded  with  China  on 
the  loth  of  May,  1909,  was  indeed  so  conciHatory  that 
the  Chmese  at  first  suspected  therein  some  deep-laid  and 
sinister  designs.     The  high-handed  methods  of  the  auto- 
cratic Russian   Railway  Company  were   replaced  by  a 
sweet  reasonableness  which  the  Peking  Government  were 
quite  unable  to  understand,  but  of  which  thev  soon  pro- 
ceeded to  take  ever>.  advantage.     No  soone'r  had  they 
reah.ed  that  Russia  was  prepared  to  allow  the  exercise 
of  their  sovereign  rights  in  the  Manchurian  Railway  set- 
lements.  than  they  proceeded  to  encourage  American 
and  German  am  itions,  sedulously  fomenting  differences 
at  Harbin    Khailar.  and  other  places,  by  which  means 
they  hoped  to  obtain  full  administrative  control  of  the 
municipalities.-     Such  are  the  words  of  Mr.  Bland,  when 
commenting  on  Russia's  post-bellum  attitude  ■^•«     Harri 
son  uses  a  similar  lang-uage :     "  Russia  was  inclined  to 
be  too  self-assertive  before  the  war,  and  the  inevitable 
nemesis  overtook  her:  to-day.  on  the  other  hand    he 
representatives  appear  to  have  gone  to  the  other  extreme 
-  h  the  result  that  Russian  vested  interests  are  in  dan-' 
ger  ot  being  seriously  jeopardized."  " 

'JSeeBland,  op.  cit,  page  3.36. 
i'ee  Harrison,  op.  cit.,  page  20Q. 


■msM' 


mLiMkik^^L^biJBsasj'.^'^,!* 


RUSSIA 


109 


Of  course  during  the  evacuation  period.  Russia  was 
rather  slow  in  handing  the  sovereign  rights  over  North 
Manchuria  back   to  China.     "Russians   seem   to  have 
watched  the  Japanese  and  followed  their  lead  in  political 
matters.     As  the  Japanese  armies  were  withdrawn,  so 
also,  in  about  the  same  ratio,  were  the  Russian  armies 
removed  from  China's  provinces."  =«     The  same  writer 
continues:     "In  one  important  matter,  however,   Rus- 
sia's post-bellum  policy  in  Manchuria  differed  from  that 
of  Japan.     This   is   in  commercial   affairs.     The   Rus- 
sians never  have  pursued  a  niggardly  policy  in  regard 
to  the  trade  of  other  nations  in  Manchuria.     On  the  con- 
trary, during  the  Russian  regime  before  the  war  foreign 
trade  in  the  country  greatly  increased,   especially  that 
of  the  United  States,  owing  to  the  fact  that  a  condition 
of  comparative  order  prevailed,  and  that  the  Russians 
interposed  no  obstacles  to  commerce.     The  present  in- 
dustrial situation  of  Russia  does  not  require  special  ex- 
ploitation in  her  favor  of  eastern  markets.  .  .  .  After 
the  war,   Russia  resumed  this  policy  which  was  more 
sharply  thrown  into  relief  becau.se  of  Japan's  opposite 
attitude  in  the  south.     Russia  made  no  attempt  to  pre- 
vent foreigners  from  entering  the  country  after  peace  was 
established.     Instead  of  interposing  obstacles,  to  the  im- 
portation of  products,  as  Japan  did  in  her  sphere,  Rus- 


376. 


"See  Millard,  "America  and  the  Far  Eastern  Question,"  page 


.!«? 


I  lO 


mREIGX  nxAN-CIAL  CONTROL  IN"  CHINA 


3ian  officials  sraoo.hed  their  way  by  providing  routes  of 

access. 

But  whiie  the  control  exercised  by  Russia  in  Man- 
chuna    of   late,   was   very   moderate,   she   nevertheless 
strengthened  her  position  considerably  by  new  railway 
enterprises  in  these  regions.     In  the  agreements  of  July 
30th    1907.  July  4th.  ,910,  and  July  3rd.   ,9.6.  Japan 
and  Kuss,a  muttmlly  guarantee  their  vested  and  future 
.nterests  in   their  respective  spheres  and  promise  each 
other  support  in  case  of   foreign  interference  =»     The 
agreements  suggest  that  Japan  and  Russia  have  made  up 
heir  mmds.   eventually   to   divide   Manchuria   between 
them,  and  the  first  fruits  of  these  agreements  are  to  be 
seen  m  several  new  railroad  contracts  as  well  as  in  the 
effective  exclusion  of  other  powers. 

Russia  had.  immediately  after  the  war.  begun  calmly 
to  conduct  surveys  in  the  provinces  of  Amur  and  Baikalia 
with  a  view  to  providing  for  the  regeneration  of  Rus- 
s.an  policy  in  the  Far  East  by  means  of  a  colossal  rail- 
way undertaking- the  Amur   Railway.     A   provision 
for  connection  of  the  Amur  Railway  at  Blagoveshchensk 
was  made  m  1914  by  means  of  a  new  Manchurian  rail- 
way contract.     A  detailed  account  of  this  contract  can- 
not be  given  for  the  same  reasons  which  hindered  us 
from  investigating  any  other  railway  agreements  con- 

"  The  agreements  will  be  analyzed  in  Chanter  vr   .• 
of  greater  importance  to  Japan  than  to  Rul^fa  '  "'""  '^'^  "' 


^^^^ 


RUSSIA  III 

eluded  within  the  last  three  years.     We  take  our  infor- 
mation on  the  project   from  the  far  Eastern  Rn'iczi; 
which  says : «»     "  An  important  agreement  was  signed  in 
Peking  on  March  27th  last  Letween  the  Russo-.  .siatic 
Bank,  represented  by  Mr.  L.  de  Hoyer,  and  the  Chinese 
Government,  represented  by  Mr.  Liang  Tung-yen,  the 
Minister  of  Communications,  and  Mr.  Chou  Hsu-shih, 
Axinister  of  Finance,  for  the  construction  of  a  railway 
connecting  the  cities  of  Harbin,   Mergen,   Aigun,   and 
Tsitsihar,    in   Northern   Manchuria.     Harbin   is   at   the 
junction  of  the  Siberian  Railway  and  the  line  running 
south  to  Changchun  and  thence  to  Dalny,  while  Tsit- 
sihar is  connected  with  the  Siberian  Railway  by  a  light 
line  which  will  be  taken  over  under  the  agreement  just 
signed.     Mergen  is  a  little  more  than  half  way  between 
Tsitsihar  and  Aigun,   which   is  on   the  Amur   River. 
North  of  Aigun,  on  the  opposite  side  of  the  Amur,  is  the 
city  of  Blagoveshchensk,  which  the  new  railway  is  des- 
tined to  serve.     Connection  will  be  made  by  means  of 
ferry  boats  with  what  is  now  the  village  of  Heiheifu, 
opposite  Blagoveshchensk,  where  the  railway  will  termi- 
nate.    The  total  length  of  the  proposed  railway  is  ap- 
proximately 1,000  kilometers.     It  will  link  up  the  Sibe- 
rian Railway  with  the  Amur  River,  and  will  consolidate 
Russian  interests,  and  incidentally  develop  great  areas 
of  valuable  territory,  in  North  Manchuria.     An  inter- 
••See  "  Far  Lastern  Review,"  Vol.  11,  pages  150  and  385. 


I 


11 


ft:  I 

m 


C^r^gii 


•12  l-ORF.IGX  FIXAXCIAL  COXTROL  IX  CHIXA 
esting  point  is  that  it  will  cover  the  northern  section 
cf  what  IS  known  as  the  Chinchow-Aigt  i  project,  the 
agreement  for  which  is  held  by  the  American  group  of 
Lankers.  but  which  was  rendered  void  bv  the  energetic 
protests  of  Japan  that  the  proposed  line  would  parallel 
the  South  Manchuria  Railroad. 

"  The  agreement  is  for  a  loan  of  50  million  roubles, 
and  an  additional  amount  which  might  be  required  to 
complete  the  project.     The  loan  is  to  be  floated  when 
financial  conditions  may  permit  after  the  war.  and  in 
whatever  markets   the   Russo-Asiatic   Bank  may  deem 
money  to  be  available.     The  agreement  is  regarded  as 
an  improvement  on  other  railway  agreements  in  China 
where  the  interest  of  the  financiers  are  concerned  with 
control  of  expenditure,  etc.,  while  the  Chinese  Govern- 
ment gams  a  distinct  pecuniary  advantage  owing  to  an 
arrangement  being  made  whereby  the  working  of  ex- 
change cannot  be  so  disastrous  as  in  the  case  of  other 
railroad  lines.  ...  The  bondholders  receive  ample  pro- 
tection in  the  usual  wa.  by  having  the  line,  etc..  as  secur- 
ity, by  the  employment  of  qualified  engineers  and  ac- 
countants, etc..  and  in  addition  by  the  arrangement  that 
the  earnings  of  the  railway  shall  be  deposited  in  branches 
of  the  Russo-Asiatic  Bank." 

Furthermore  Russia  demands  from  China  a  concession 
for  a  railway  from  Kiakhta  to  Urga  and  through  Mon- 
golia to  Kalgan.  which  is  to  connect  the  Siberian  system 


■  MSSLm'^U-  ^ 


RUSSIA 


"3 


with  Peking  via  the  Peking-Kalgan  hne.  But  this  pro- 
ject is  of  the  future.«>  Another  project,  namely,  for  a 
railway  from  Kokand,  the  terminus  of  the  Central  Asian 
line,  through  Kashgar,  Hami.  Soochow,  to  Lanchow-fu. 
in  China,  has  also  been  set  aside  for  Russia  to  finance 
and  construct."^  These  lines  would  be  purely  for  the 
advancement  of  Russia's  strategical  position  in  Mongolia 
and  China,  and  would  bring  the  northwest  and  western 
provinces  within  the  Russian  sphere. 

The  first  steps  towards  the  establishment  of  a  Russian 
sphere,  if  not  a  Russian  protectorate,  have  been  taken 
under  the  Russo-Mongolian  agreement  and  Protocol  of 
the  2ist  of  October,  3rd  of  November,   1912.  respec- 
tively."''     The  agreement  provides  for  the  exclusion  of 
Chinese  influence   in   Mongolia.     According  to  Article 
I,  Mongolia  is  "  to  admit  neither  the  presence  of  Chi- 
nese  troops   on   her  territory  nor   the   colonization   of 
her  land  by  Chinese."     The  main  provisions  of  the  pro- 
tocol are  as  follows:     Russian  subjects  shall  enjoy  the 
right  to  trade  freely  without  payment  of  any  duties,  taxes 
or  other  dues  and  to  open  financial  institutions  and  fac- 
tories wherever  they  choose.     Russian  subjects  shall  be 
empowered  to  enter  into  agreements  with  the  Mongolian 

«2  c"  -Vi.^-  ^onsular  Reports.  No.  245.  Oct.  20.  1913,  pa«  ^cu 

"See  "Far  Eastern  Review,"  Vol.  ro.  page  290.  ^^    ^^^ 

The  text  of  all   Mongolian  agreements,  etc..  is  found  in  the 

American  Journal  of  International  Lazv,   Vol.    10    No    4    suDole 

ment,  pages  239  ff.  ^'  *"PP'e- 


.:.;:.^^ai  ^Md  ^^^min^s- 


"4 


|-OREI(;n  FIVAN-CIAl,  CON-TROL  I.V  CHIN'A 


novo  „„,e„.  respecng  ,h.  workfng  of  mineral,  and  .in,. 
I«    fi*cr,es,  etc.     K„,„ians  shaU   retain   .he   ri.h.   .o 

he  ,ra„.„  of  .ares  l^.een  a,,  poin.s  „f  M„„g„,,  Z, 
u«,a„  consuls  in  case  of  need  s.,a„  avail  .henfselve   o 
.M.mgol,an  (.overnmen.  pos.al  es.abiishmcu, 
Ch,„a  had  .o  acknowledge  .his  s.a.e  of  affairs  and 

1     1    p  "''°''  "■'""""  ""««  "■•  a»is.ance 

On  Sep..  3o.h,  ,9,4.  R,,,,,;,  „,„,j  ,.„,^ 

enri:!."™^"""  ""'^ """'"'-"  ''-^^•^  ^«  - 

r"   this         ""     '  "  '"  ''  ""™^^  -'  concerned." 

O.  .er  Mongoha  ,„  deciding  wha.  railway  lines  .0  b.,ild 
and    he  ,ne.h„d  of  procedure.     Ru.ssia  recognizes  Mo" 

danes  ,f  ,he  funds  can  be  raised  there,  bu.  Mongolia  is 
*  ged  o  consul.  Russia  before  making  concessions  ,0 
ra.luay  cons.r.,c.,on  .„  o.her  na.ions.     Since  Mongolia 
'!  ""'""""^'-^  ^''  '•  -  -..den.  .ha.  Russia  has  .he  ex 
cl.|s,ve  r,gh.  ,0  build  railways  in  this  coun.ry 

The  tripar.i.e  agreemen.  of  June  yth.  ,9,5.  i,  ,he  final 
acknowledgnten.  of  .he  existing  state  of  affairs."     Both 


."i^^wa^i.s%:^^KJ^*'  ■;j^^^w«r.»rw!3HP^'»ipaa 


wjmK.m 


';.^£)Lli' 


RUSSIA 


"5 


China  and  Russia  agree  to  abstain  from  all  interference 
with  the  internal  administration  of  Outer  Mongolia. 
Russian  right  to  free  trade  is  confirmed,  while  China  is 
nominally  acknowledged  as  suzerain.  Practically,  how- 
ever, Outer  Mongolia  is  under  joint  Russian  anil  Chi- 
nese protection. 

Mr.  E.  T.  Williams  sums  up  Russia's  position  in  Mon- 
golia :  "  These  agreements,  then,  have  considerably  in- 
creased the  political  and  commercial  rights  of  Russia  in 
Mongolia,  and  they  thus  tend  to  restore,  if  not  to  en- 
hance. Russian  prestige  in  the  Far  East  which  had  been 
somewhat  lessened  by  the  result  of  the  Russo-Japanese 
War.""" 

To  the  beneficent  efTects  to  be  expected  from  Russia's 
position  in  Mongolia.  Mr.  M.  D.  Carruthers  bears  wit- 
ness in  his  splendid  work  on  "  Unknown  Mongolia."  "^ 
"Taking  for  granted  an  autonomous  Mongolia  under 
the  protection  of  Russia,  we  can  prophesy  far-reaching 
and  fundamental  changes  in  the  lives  of  the  people  and 
in  the  future  of  the  Mongo'  race.     Mongolia  will  become 
—  indeed,  probably  has  already  become  —  a  land  of  ac- 
tivity and  progress  instead  of,  as  formerly,  a  land  of  stag- 
nation and  suppression."     And  again:     "The  Russian 
influence  has  obviously  an  advantage  over  that  of  the 
Chinese.     Tha    Russians    fraternize    with    the    Mongol 

;;  S*^<=  f"-  -^of  I"t.Lau,  Vol.  10,  Vo.  4.  page  8o8. 
troducUon.^SriV.     '"'"''^^"  ''^"«°"^'"  ''^^^  ^-S.  3^7.  and  In- 


"TTJ 


li6 


'■-"RR"..V  FI.NA.VCl.M.  ,ONTR„l.  fV  CHIN'A 


ma    e^  L TT"'-  '^'"■«"  '"^  ^-fT  much  les. 
mar  ed  than  , ha,  :.,„«„  ;he  Cin^e  and  ,he  Mongols  ■• 

\  Wsee  ,he  .Mo„g„|i,„  .^^.^^^^ 
pas.,  long  withered  nnder  ,he  .lighting  influence  ^'d' 

K«ss.a  to  find  a  vvarnuh  and  a  protection  „hich  Chinese 
■suzeramly  has  failed  to  give  them  •■ 

a  J^Th:":::::":':"  "■' '-  - "-  --'""■"«  -^^^ 

secret  of  Russian  success  in  Kastern  Asia 
ba-d  as  ,t  ,s  on  a  national  character  ami  a  dispos  .ion 
<'.fferc„t  fro  .  the  res.  of  Europe.  We  l.gan  our  1 
.er  by  contrasting  English  and  Russian  governmer^', 
-hods  and  shall  no.  conclude  with  a  fe/wordTaC 

•he  d,fif  rences  ,n  a.ti.ude.     The  a.,i.ude  of  Russia  to- 
w^r  s  A  ^„^  _^^  ^^^_^  ^^  ^^^  ^^    s 

and  e  "■  T  '""  ""^  '"^  •"■"«'-•  conscientious 

rule  1,,  her  of  As,a.,c  subject  races;  but  the  Russian, 
"ho  exercse  ,he  adn.in.s.ra.ive  funcions  in  .he  Fa, 
are  naturally  ntore  afl-able  Utan  the  English    ,nd  aT 

Iron,  ongtn.   tentperament.  and  personal   habits    and 
through  ,nt,n,ate  contact  with  Asiatics  front  th    dawn 
of  htstory.  ,h.  Russian  is  nearer  to  the  Asiatic  poi«  of 
v.-  than  the  Englishman.     Says  Wirt  Gerrare  ■       Ru, 
-.  s  .  .  .  occupation  of  Northern  and  Central  Asia  ha," 


RUSSIA 


"7 


been  of   benefit   to  the  inhabitants.     It   was  only  her 
methods  of  conquest  which  were  unnecessarily  severe. 
.  .  .  Generally  the  Russian  treatment  of  the  native  and 
subdued  races  if  not  perfect,  or  ethically  correct,  is  not 
worse  than  that  of  other  civilized  Christian  nations."  " 
X'ladimir  maintains  that  "  Russian  annexation  in  Eastern 
A>ia  has  been  favorable  to  the  Chinese  people,  opening 
new  fields  for  their  trading  enterprise.     The  Russians 
have  had  the  greatest  toleration  for  the  customs  of  the 
Chinese  and  for  their  local  self-government,  even  when 
it   vvas  prejudiceri  to  their  legal  sovereignty."  «"     Even 
Lord  Curzon  in  -ok  "  Russia  in  Central  Asia  "  ad- 

mits that  Russia  has  in  her  career  of  Asiatic  conquest 
achieved  a  successful  and  a  salutary  end,  and  that  Rus- 
sia's dominion  is  "loyally  accepted  by  the  conquered 
races."  ^" 

Finally  the  relations  between  Russia  and  China  cannot 
be  understood  without  taking  into  account  the  fact  that 
in  spite  of  encroachments  upon  China  by  Russia,  the 
two  countries  have  never  actually  been  in  a  state  of  war, 
excepting  a  few  minor  boundary  disturbances.  While 
European  powers  in  general  were  not  permitted  to  send 
diplomatic  representatives  to  Peking  until  1858,  Russia 
had  maintained  a  semi-official  embassy  there  from  1692," 

"«  Sec  Wirt  Gcrrare,  op.  cit.,  page  317. 

"»Sec  Vladimir,  op.  cit,  page  317. 

l"  See  Cur/on.  "  Russia  in  Central  Asia."  Chapter  X. 

■>  See  Ravenstein,  "The  Russians  on  the  Amur,"  page  71. 


msMm-m-^^ 


ti8 


'■"Ri:i<;.N-  FIN-A.VCIAI.  COXTROL  I.V  CHINA 


y   '^nma.     The   Russian   representative  has 
va.v.  been  pe.o„a  grata  a,  .he  Cour,  of  China  and  ha 
'hus  .een  a  le  .o  enjoy  a  confidence  denied  to  others 

Apparently  nothing  could  shake  Russia's  faith  in  her 
-  Eastern  policy.     Russian  policy  in  Asia  has  L  e 
anged.  „  n,ay  have  been  checked  at  ti.es.  but  Rut  I 

pressed  forward  and  regained  lost  ground 
It  .s  the  absence  of  a  definite  or  at  leas,  ulterior  aim 

^vhich  distinguishes  fhp  rh,-,,^         ,•  ^cnor  aim 

:itred"'*-'---<'--«n.uri:st: 

No  wonder  then,  that  even  in  mrr       d      • 

.^;;;- r-'^"- -^^- 3d"  :r 

\\  e  hnd  ourselves  on  the  eve  of  n«         i     •  ,  " 

tures      Tn  J    ,  "^^'  colonia    adven- 

-^.H'Cfirr::!:^::*---- 

T„   ,    .   .    ^  "nuu,  IS  aoout  to  be  renewed  "  72 

^"   I^nef.   Russia's  chances  to  reach   h.r 
^-reater  than  those  of  all  oth.    P  ^""'   ^'"'"^ 

j~.h...„„.„H,.:..T.r';;-r"" 

"See  Alexinsky.  "  Russia  and  the  Great  War."  page  ... 


CHAPTER  IV 


FRANCE 

Of  all  Western  countries,  it  has  been  the  intercourse 
of  France  with  China  which,  apart  from  trade,  has  been 
considerable.     Both  the  eariier  knowledge  of  the  West 
acquired  by  China  and  that  of  China  acquired  by  the 
West  were  mainly  achieved  by  French  missionaries,  who 
also  have  played  an  important  part  politically.     The  acci- 
dent of  the  dispatch  of  an  envoy  by  the  King  of  Annam 
to  the  court  of  Louis  XIV  turned  the  eyes  of  that  mon- 
arch and  of  the  ecclesiastics  eastward  to  the  possibility 
of  obtammg  political  influence  in  Indo-China.     In  1787 
Bishop  Pigneaux  de  Bretaine  tried  -  though  in  vain  - 
to  bring  Tonkin  under  French  rule.     His  designs  were 
frustrated  by  the  French  Revolution  and  only  in  1858 
another   French    force  was   dispatched   to   Indo-China 
This  time  French  attempts  were  successful,  culminating 
in  the  final  annexation  of  Cochin-China  in  1862. 

A  protectorate  over  Cambodia  was  established  in  1863 
In  the  treaty  of  1874,  France  acknowledged  the  inde- 
pendence.of  Annam;  but  Annam  reded -in  Article  V 

119 


^! 


(»  ; 


w-'wrn 


120 


l-ORI-KJX  |.-,XAN-C,AL  CONTROL  I.V  CHINA 


In  ,884  .he  "  Convention  Fournier  -  was  signed  by 

ir.  ::rrr:err:r"^'^"--- 
.Heso„.e..on.ie.o,cHi:rT:;;;;THr 

'en.,o„  was  confinned  by  China  in  .he  .rly  o     ,88- 
under  which  France  engaged  herself  to  "  re-esmbU  h  and 
n,a.„.ain  order  in  .hose  provinces  of  AnnaJl  M^ 
der  upon  .be  Chinese  En,pire."  =    ,„  Ar.icle  VH  China 
agree<l  .ba.  in  ca.,e  she  should  decide  on  cons.™«  „" 
-Hways,  she  would  have  recourse  .o  French  indl::  "' 
Th,s  pro.ec.ora.e  then  formed  the  basis  for  fur.he, 
advance  on  China  proper,  .be  firs,  and  mos.  i.p"  ^^ 
means  of  which  was  ,o  be  a  railway  into  Yunnan     And 

the    onven„on  of  ,895.  .he  fif.b  Cause  of  which  says 

it  IS  understood  that  China   for  fh«  .     i-      • 
„  •        .     .  '-'"ina,  lor  the  exploitat  on  of  its 

.    ".Tav     r°™^"  °'  ^"""^"'  '^"-^'''  »"  Kw  "«! 
tacurer     and    engineers,    .be    exploi.a.ion    ren- 
nevenaeless  suhjec.  .0  .he  rules  proclaimed  by  .,  . 

C     '"rr"""'  "  "^""'"^  "a"""-!  Industrie        t 
.»  agr     ,   Ha.  railways  either  those  already  in  existence 


n^S»'-i. 


FRANCE  ,2, 

or  .hose  projected  in  Annam  may,  after  nuuual  agree- 
men.  and  under  conditions  to  be  defined,  be  continued  on 
Chinese  territory."  3 

On  the  strength  of  this  agreement  French  railway  en- 

terpnse  tn  the  south  of  China  was  seriousiy  thot.ght  of 

and  proposed  to  China  in  the  years  ,897  and  ,898  when 

he  cons.r„ct,on  of  a  comprehensive  system  of  raihvays 

m  Indo-China  was  mooted. 

The  growth  of  French  influence  and  railway  enterprise 
■n   Southern  China  marks  the  commencement  of  tie 
reah.a„on  of  certain  ■  .-ench  ambitions  for  the  further- 
ance of  which  Tongking  was  occupied.   The  most  remark- 
able utterance  in  reference  to  France's  poHcv  is  to  be 
found  ,n  a  most  valuable  work  by  M.  Doumer,  the  late 
Governor-General    of    Indo-China,    entitled.    "  LTndo- 
Ch,ne  Francatse."    He  writes:    "  Le  chemin  de  fer  de 
penetration  au  Yunnan,  par  la  vallee  du  Fleuve  Rouge 
ava,t  one  im.^rtance  politique  qui  n'etait  pas  moindre 
que    son    tmr^rtance    commerciale    indeniable.    Long- 

w  -7°;''" '"  """^ ''™'' »""  -'°-  q-  P- 

acces  qu,l  donnai.  au  Yunnan.     On  a  tres  jus.emen. 
reconnu  par  la  suite  qu'll  aval,  une  valeur  propre;  mais 

"See  Rockhill,  op.  cit.,  No.  3 

oJ;:.  's^si-?.'  s,s  'i',:"ii"  ;:;^T-  ^'^'•^.•'^. 

»"r  le  territoire  Chinois."  etc  Pourront  ctre  prolongees 


'-'^     FOREIGN-  FINANCIAL  CONTROL  IN  CHINA 

ce  n'eeait  pas  u„e  raison  pour  o„bU„  le  but  de  notre 
pirse  de  possession."  '  ' 

In  other  words,  Tonglcing  was  occupied  in  order  to  pro- 

K  ,  ^"^^^'°"  "lay  n  part  be  answered 

by  gomg  back  to  the  motives  behind  Z  .       .^"'"^^"^^ 

the  rest  of  French-China     I,    '''''"V      "'^^"'^'^'«"  ^^ 

Dubois  et  F  ^^^'"^-     ^^^y  a'-^  thus  summarized  by 

Dubois  et  Ferner  m  their  work  •'  Colonies  Frangaises  - 

Lacqu.su,on  de  la  Cochinc.me.  le  protectorat    u  Cam- 

a,n,rau.  n  auraicn,  point  sans  doutc  obtenu  les  resol 

spensables  au  succos.  Au  rcste  une  politique  Zl- 
■ell  n,e„t  con^ercialc  et  do„t  Tespoir  prLipa,  repl 
ur  la  concuete  dc  nouveau.x  n,arches  en  plys  Ip" 

Ch,no,s.     Dautres    mobiles,    en    particulier    le    dLr 
dappuyer  1.  propagande  religieuse.  renforcerent  eel 
pren,,ere  conviction.    L-intelligcnce  de  nos  d.sca  r 
pom,  d  honneur  de  ne  pas  lacher  prise,  une  fois  engages 
U.^y'£XT"ilTf^'"'  """"■"■■  "^^  ».    See  ah,  P 

j»^.^  .„,„,.,.„  ,„  -He^Are^r-u'ss  - 

•  See  D„.o.  e.  Fe„ie,,  •■  c„,o„ie,  F,a„«i.eC  pa,e.  ^,  „,  ,,, 


iMl''^i^mmmmaMw^imfi.3 


FRANCE 


123 

C'etait    aussi    la 


firent    le    reste "  .  .  .and    again:        _.    ., 

revelation  de  la  richesse  miniere  du  Yun-nan,  nouvel 
attrait,  et  nouvelle  raison  pour  les  Franqais  de  s'interesser 
aux  provinces  septentrionales  de  I'empire  d'Annam. 
Occupation  d  un  pays  plus  salubre  dun  debouche  et  d'une 
vo,e  d'acces  de  I'empire  chinois,  d'un  fleuve  plus  maniable 
que  le  Mekong,  tels  se  presentaient  aux  esprits  les  avan- 
teges  d'une  entreprise  conseillee  par  Jean  Dupuis  et  que 
lamiral  Dupre  esperait  mener  a  bonne  fin,  grace  a  I'cx- 
perience  particuliere  de  Francis  Gamier." 

Mr.  Hazen,  the  American  historian,  writes  in  his  book 
"  Europe  Since  1815  ":  under  the  masterful  influence  of 
Jules  Ferry,  prime  minister  in  1881,  and  again  from 
1883  to  1885,  the  Republic  embarked  upon  an  aggressive 
foreign    policy.     She    established    a    protectorate    over 
Tunis;  sent  an  expedition  to  Tonkin,  to  Madagascar- 
founded  the  French  Congo.     This  policy  aroused  bitter 
opposition  from  the  beginning,  and  entailed  large  ex- 
penditures, but  Ferry,  regardless  of  growing  opposition, 
forced  It  through,  in  the  end  to  his  own  undoing.     His 
motives  in  throwing  France  into  these  ventures  were 
various.     One  reason  was  economic.     France  was  feel- 
ing the  rivalry  of  Germany  and  Italy,  and  Ferry  believed 
that  she  must  gain  new  markets  as  compensation   for 
those  she  was  gradually  losing.     Again.  France  would 
gam  in  prestige  abroad,  and  in  her  own  feeling  of  con- 
tentment,  if  she  turned  her  attention  to  empire  building 


'H     FOREIGN  FIKAXCIA..  CONTROL  IN  CHINA 
and  cea    d  ,„  .hi„.  .o.„iJ,,  of  ,„  ,„^,  ,„  „,  <-„. 
»an  „ar.     Her  omiook  ,voc,iu  be  broader.     Moreover 

abou,  her  were  reaching  ou.  for  Afriea  and  Asia.     Th 
a       ™,er,a„sn,  had  begun.     France  ™„s.  par.icipa 
.'    ■"  """■'""'"'  »■■  !«=  left  hopelessly  behind  in  V 

*:tr  „r"^- . ''""  ^"-^- — 'eiis 

polic,  of  e.xpans,o„  was  carried  o„l.  and  the  colonial 

e.xpense  of  political  peace  at  home"' 

France  had  to  fall  i„  ,i„e  with  the  race  for  Empire 
and  economic  expansion.     She  was  feeling  the  econom  c 
on,pe.,t,o„  of  all  other  nations.     I-urthermoreTra™ 

tr     ::d'"h  ''"'■''°"  ''  '  ''-'  -e,-,ending   :: 

•O  .  and  she  naturally  preferred  to  invest  her  mo„ev  I 

colonies  and  spheres  of  interest  of  her  own  ' 

.erltt;v';;i:  t  '-^  --  °'  ^^^-«  -^  >"■ 

,.-„„      ,  "'^  °'  concessions  in  China  began 

I  ranee  lost  no  time  in  asserting  herself.    The  grV^est' 

rrr'-v:'""^^^"'«''°-^"^-*chrr 

urged  thradonl       T""'  '""  '"""'•°"^  ^'""^n 
urged  the  adoption  of  a  considerable  railway  program 

«pon   the   French   Government.     ,„   his   speech   to  Th" 
Conseil   Superieur  de   rindo-Chine  he   referred   to    I 
aggressive  att  tude  of  othp-  Pr„.,»  ^ 

necessifv  nf      .k !,!  ''  ^"^  emphasized  the 

necess,t3  of  outbidding  France's  rivals  in  the  South  of 

See  Ha.en.  "  Europe  Since  ,8,5.'  page  35J. 


FRANCE 


125 


China.     To   use   his   own    words:     "La   question    des 
chem.ns  de  fer  dans  tout  T Extreme-Orient  est  aujourd'- 
hu,  a  I'ordre  du  jour,  comme  en  temoignent  les  efforts 
'les  r.vaux  de  la  France  et  les  missions  officielles  en- 
voyees    en    Chine.  .  .  .  L'Angleterre.    avec    une    har- 
diesse  que.   de  notre  c6te.   nous  n'avons  pas  montree 
jusqu  ic.  se  met  en  marche  par  la  Birmanie  vers  le  Yun- 
nan  et  le  Ssetchouen  qui  semblaient  reserves  a  notre 
penetration    commerciale.     Pourtant.    si    nous    savons 
vouloir.  nous  devons  triompher  dans  cette  lutte  pacifique 
Nous  nous  trouvons  favorises  grace  aux  facilites  que 
nous  donne  la  vallee  du  Fleuve  Rouge  pour  atteindre  le 
Yunnan.     Mais  il  faut  profiter  de  cette  situation  et  join- 
dre  aux  efforts  faits  par  le  Gouvernement  de  la  Metropole 
I  action  de  la  Colonie  pour  construire  le  reseau  indo- 
chmo.s   qui    servira    de   base   a    notre   penetration    en 
Chme.    ' 

A  similar  view  is  expressed  by  Dubois  et  Ferrier- 
"  L'mtervention  directe  de  plusieurs  puissances  europeen- 
nes  en  Chme  fait  a  nos  hommes  d'etat  un  devoir  pressant 
d  assurer  cette  nouvelle  expansion  de  notre  colonie  con- 
smuee  d'hier.  vers  un  pays  libre  de  quatre  rent  millions 
d  habitants.  ...It    faut    done    pour    rendre    efficace 
le     bienfait     de     ce     voisinage.     prendre     I'mitiative 
d  une  penetration  qui  nous  rapproche  le  plus  tot  possible 
des  regions  les  mieux  dotees.     Aussi  Foeuvre  de  notre 
^  See  Doiimer.  op.  cit,  page  326. 


mW 


126      F0RP:IGN  FIXAXriAL  CONTROL  IN'  CHINA 

diplomatic  commerc  iale  des  dix  dernieres  annecs  en 
Chine,  est-elle  une  o  uvre  profondement  solidaire  de 
notre  expansion  indo-chinoise."  ^ 

In  1897  and  early  in  1898,  France  used  a  policy  of 
pressure  upon  China,  similar  to  that  exercised  by  other 
Powers.  On  April  loth  the  Chinese  Government  ac- 
quiesced in  the  following  demands  of  France :  * 

1.  The  Chinese  Government  grants  to  the  French  Gov- 
ernment, or  to  the  French  Company,  which  the  latter 
may  designate,  the  right  to  make  a  railway  from  the 
frontier  of  Tonking  to  Yunnanfu:  the  Chinese  Gov- 
ernment having  no  other  responsibility  but  to  furnish 
land  for  the  road  and  its  dependencies.  The  route  of 
this  line  is  actually  surveyed,  and  will  be  fixed  later  on 
in  agreement  with  the  two  Governments.  Regulations 
will  be  jointly  made. 

2.  The  Chinese  Government,  in  consideration  of  its 
friendship  for  France,  leases  the  bay  of  Kuangchouwan. 
for  99  years,  to  the  French  Government,  which  may 
establish  a  naval  station  and  coal  depot  there.  The 
boundaries  of  the  Concession  will  be  fixed  hereafter  by 
agreement  between  the  two  Governments,  after  examina- 
tion on  the  spot.  The  question  of  rental  will  be  arranged 
later  on. 


•  See  Dubois,  op.  cit.,  page  824. 

»  See  "  Documents  diplomatiqiies,  Chine,  1894-1808,"  pages  49  to 
SI.  English  texts  given  by  Rockhill,  op.  cit.,  Nos.  36  and  24.  See 
also  "  British  Blue  Book,  China,"  No.  i,  1899,  Vol.  CIX,  No.  17. 


FRANCE 


127 


3.  When  the  Chinese  Government  organizes  a  definite 
Postal  Service  and  places  a  high  functionary  at  its  head, 
it  proposes  to  call  for  the  help  of  foreign  officers,  and 
declares  itself  willing  to  take  account  of  the  recommenda- 
tions of  the  French  Government  in  respect  to  the  selec- 
tion of  the  staff. 

4.  With  the  purpose  of  assuring  the  relations  of 
neighborliness  and  friendship  between  China  and  France ; 
with  the  purpose,  equally,  of  seeing  the  territorial  in- 
tegrity of  the  Chinese  Empire  maintained  and,  further, 
because  of  the  necessity  of  taking  care  that  no  change 
be  introduced  in  the  existing  situation  as  regards  the 
provinces  bordering  on  Tongking,*"  the  Goverrunent  of 
the  Republic  would  attach  particular  value  to  receiving 
from  the  Chinese  Government  an  assurance  that  it  will 
not  cede  to  any  other  Power  all  or  a  part  of  the  territory 
of  those  provinces,  either  definitely  or  temporarily,  or 
on  lease,  or  by  any  title  whatsoever. 

A  declaration  concerning  the  non-alienation  of  the 
Island  of  Hainan  had  been  given  by  the  Chinese  as  early 
as  March  15th,  1897.^* 

Having  gained  their  points  the  French  began  railway 
construction.  M.  Doumer  proposed  to  the  Conseil 
Superieur   a    comprehensive    railway    scheme    for    the 

1"  The  French  text  reads  here :  "  Par  suite  de  la  necessite  ni  comte 
de  veiller  i  ce  que  dans  les  provinces  limitrophes  du  Tonkin,  il  ne 
soit  apporti  aucune  modification  alitat  de  fait  et  de  droit  existant." 

"  See  "  Documents  diplomatiques,  Chine,  1894-1898,"  page  33. 


Is 


I -'8      FORKIGX  KIXAXCIAL  CONTROL  IN  CHINA 

French  colonies,  including  a  line  from  Haiphong  to 
Hanoi  with  an  extension  to  Yunnan.  After  the  author- 
ization of  the  scheme  by  this  body  M.  Doumer  proceeded 
to  Paris  to  obtain  the  sanction  of  the  I'>ench  Chamlxr. 
The  law  authorizing  the  Government  of  Indo-China  to 
l)orro\v  200,000,000  francs  for  exclusive  use  of  a  rail- 
road system  was  promulgated  on  the  25th  of  Dec,  1898.'-' 
In  Article  HI  the  Government  of  Indo-China  is  author- 
ized to  grant  a  guarantee  of  interest  to  the  Company 
which  was  to  become  the  "  concessionaire  "  of  this  line. 
The  money  which  the  colonial  government  might  be 
called  on  to  furnish  is.  in  turn,  guaranteed  by  the  French 
Republic. 

Owing  to  the  Boxer  troubles,  little  was  done  towards 
commencing  railroad  building  in  Yunnan  and  only  the 
construction  of  the  French  colonial  line  from  Haiphong 
to  Hanoi  and  thence  to  Laokay  was  undertake;.. '^  But 
in  1901,  M.  Doumer  succeeded  in  constituting  a  syndi- 
cate composed  of  the  principal  financial  houses  of  Paris, 
and  in  concluding  with  this  syndicate  a  convention  for 
the  building  of  the  railway  from  Laokay  to  Yunnan- 
hsien  and  for  the  working  of  the  whole  line  from  Haip- 
hong to  Yunnanhsien."     The  syndicate  is  the  exclusive 

"  Sec  Doumer.  op.  cit.,  page  320 ;  and  "  Documents  diploma- 
tiques.  Chine,  Juin-Octobrc,  igoo." 

•'  See  Kent,  op.  cit.,  page  162. 

'«See  Doumer,  op.  cit..  pages  343  ff.  and  "Documents  Diploma- 
tiques."    See  also  Rockhill,  op.  cit.,  page  405. 


-ViB^!^5^ 


FRANCE 


129 


concessionaire  and  is  to  build  the  railway  from  Laokay 
to  Yunnan,  with  a  total  length  of  468  kilometers  at  its 
own  expense  and  risk,  while  it  receives  from  the  govern- 
ment of  Indo-China,  entirely  co!  Uructed  and  ready  for 
exploitation,  the  road  from  Haiphong  to  Laokay,  being 
385  kilometers  long.  The  total  line  is  conceded  to  the 
syndicate  for  75  years,  and  is  to  l)e  exploited  at  the  ex- 
pense and  risk  of  the  concessionaire  with  eventual  share 
in  the  profits  by  the  colonial  government  (avec  partage 
eventuel  des  benefices  entre  celui-ci  et  le  Gouvernement 
general). 

The  capital  required  for  construction  of  the  railway 
to  Yunnan  and  for  exploitation  of  the  entire  line  from 
Haiphong  to  Yunnan  was  101.000,000  francs  and  was 
constituted  as  follows:  The  stock  capital  of  the  syn- 
dicate. 12,500.000  francs;  a  subvention  from  the  Gov- 
ernment of  Indo-China,  another  12,500,000  francs;  the 
rest,  or  76,000,000  francs,  in  bonds  guaranteed  by  the 
home  government  to  the  limit  of  an  annuity  of  3,000,000 
francs  yearly. 

This  convention  wi.4  signed  on  the  15th  of  June,  1901, 
was  presented  three  days  later  for  ratification  to  the 
Chamber  of  Deputies  by  the  Minister  of  the  Colonies  and 
t'  .linister  of  Finance,  and  was  linally  ratified  by  law 
of  July  5.  IQOI-  Immediately  thereafter  the  "  Companie 
fran<;aise  des  chemins  de  fer  de  ITndo-Chine  et  du  Yun- 
nan "  was  organized  and  the  bonds  issued. 


130      FORFICN  FINANCIAL  CON  FROL  IN  CHINA 

On  October  28th.  1903,  the  conditi>ns  under  which 
t  u  extension  was  to  be  made  on  Chinese  territory  were 
finally  settled  between  the  Chinese  G.  ernnu  ni  and  th- 
French  Minister.''^  They  comply  with  the  concessions 
granted  to  France  on  the  loth  of  Ap  i!,  i8i>H.  France 
va^  u  imild,  manage,  and  own  'le  raiUvay  !  ir  eight\ 
^.ars.  iut  "China  retains  full  sovereign  n^V  \  over 
'/:e  Ii:.c.  which  in  the  event  of  Ch'ia's  ))eing  at  war  will 
n.  1  I"  tisider  1  neutral,  but  'k  tilaced  under  Chin  se 
orders.  China  undertakes  the  olc  responsibility  of 
policing  and  prottrting  the  railway,  ;i,id  on  no  account 
can  the  railway  ask  for  the  assistance  i.f  foreign  troops." 
There  is  to  1"  no  Chuiese  Government  guarantee.  In- 
deed the  Chinese  have  no'liing  \vhatsf>evcr  to  do  with 
financing  or  managing  of  the  line  and  th?  /  are  .'prived 
of  all  control  and  profit 

In  this  latter  -spect  French  railway  rights  in  Chi-  a 
are  at  variance  wi  1  those  enjoyed  by  Russia  ,n  Man- 
churia. For  Russia,  as  we  have  seen,  had  adi-iitted  the 
Chinese  to  financial  and  even  administrative  artici Ra- 
tion—  at  least  no":inally.  But  other-  tiie,  t'- 
distinction  between  I'rench  and  Russiar  o,r'-  '  ql- 
though  French  "  contr<  "'  is  nominal!  -xerc  nv 
private  company  and  therefore  f;  incial,  ti  ri  ^e 
association  of  this  Company  with  the  ^Vench  Gove^  - 
ment  as  manifested  in  the  several  com  ntions  as  \  ell 
*'  See  Rockhill,  op.  cit..  p=^e  405 


^eh? 


FRAK  CE 


131 


as  the  moti . es  Lnhind  French  railw  ay  enterprise  in  Yun- 
nan leave  no  rootn  for  d  ibt  that  French  control  in 
China,  v  bouted  in  this  Fn  nch  n>  Iway  concession,  is 
•n  spirit,  s omewh  it  political.  1  le  railway  policy  of 
Fn  nee  like  that  (  Russia,  and  as  we  shall  see  like  that 
of  jap  in.  and  to  sonr  exicnt  hat  of  Germany,  "has 
been  .    u.eari  n  end,  an  incident  in  a  larger  policy, 

whu'    -a-    on,j>  he  described  as  in     itention  a  policy  of 

olon       'on ' 

Ne        lel'         renr'    policy  in  Ci     a  proper  has  been 

bv  m       -  agg'       ve  as  that     :'  Russia  before  the 

so-j      a.' :,v  War.         ith  the  exception  of  a  lew  «n- 

^i    cesr-      attempts  at    uriher  concessions  in  the  south- 

rn  provinces,  which  were  to  h'  extt  isions  of  the  existing 
t,  Iway  system,  F'rance  did  little  in  xp'oiting  her  sphere 
politically. 

Commercially,  however,  Fr  k  full  advantage 

of  'ier  privileged  position:  her  "  1  '  enabled  her  to 

esi    ilish  her  trade  at  the  expenst  :her  nations  by 

me.  ns  of  preferential  tarififs  to  the  tunherance  of  French 
commerce.  No  doubt  the  exceedingly  high  costs  of  con- 
struction and  operation  of  the  Yunnan  railway  forced 
France  to  exact  high  charges.  But  these  high  charges 
were  not  the  only  reason  that  prompted  weahhy  Chinese 
citizens  to  contemplate  a  railway  from  Yunnan  to  Nan- 
king which  would  break  the  French  monopoly  of  the 

*•  See  Kent,  op.  cit.,  page  93. 


132      FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 

carrying  trade  of  Yunnan  towards  the  sea.  The  best 
illustration  of  the  unsatisfactory  state  of  affairs  is  to 
be  found  in  a  consular  report  by  Mr.  G.  E.  Anderson, 
American  Consul  General  at  Hongkong.*^  According 
to  this  report  the  railroad  to  be  constructed  by  Chinese 
is  "  to  open  Yunnan  with  the  seaboard  through  Chinese 
territory  and  thus  avoid  present  unfavorable  conditions 
found  in  the  transit  tax  charged  for  the  transfer  of 
foreign  goods  not  of  French  or  Indo-French  origin 
crossing  Indo-China  and  also  to  avoid  the  high  freight 
rates  over  the  French  railway  into  Yunnan  which  now 
obtain."  In  another  Report.  Mr.  Anderson  remarks: 
"  The  restricted  use  and  general  unsatisfactory  working 
of  the  railway  is  due  to  the  abnormally  and  prohibitive 
high  freight  rates."  " 

The  principal  reason  for  such  discrimination  was.  of 
course,  to  protect  and  advance  the  industries  of  France 
and  her  colonies.  But  it  is  interesting  to  note  that  in 
this  France  had  no  success.  The  British  Minister  to 
China,  commenting  on  French  railway  enterprise  in 
Yunnan,  had  remarked  as  early  as  1898:  "The  im- 
pression in  French  railway  circles  is  that  a  railway 
through  Yunnan  will  not  pay  expenses."  •»  And  the 
railway  did  in  fact  not  pay  expenses  for  two  reasons: 
Firstly.  French  trade  in  Southern  China  remained  in- 

"  See  U.  S.  Consular  Reports,  1912,  No.  233,  page  1488. 
"  See  U.  S.  Consular  Reports,  1912,  No.  27,  page  503 
»»See  "China,"  No.  i,  1899,  Vol.  CIX,  No.  459.    Enclosure. 


FRANCE 


133 


significant.  Referring  to  the  articles  of  the  treaty  of 
1885  by  which  preference  was  to  be  given  to  French 
trade  and  industries,  Mr.  Douglas  says :  "  The  bulk  of 
the  trade  of  the  country  has,  in  the  natural  order  of 
things,  fallen  into  the  hands  of  the  Chinese,  the  British, 
and  the  Germans."  -«  All  preferential  treatment  of 
French  goods  has  not  increased  French  trade  materially. 
Secondly:  The  exorbitant  charges  drove  foreign  trade 
away.  To  quote  the  Far  Eastern  Rczicti':  "  As  a  nat- 
ural consequence  traders  are  again  taking  to  the  older 
and  cheaper  river  and  caravan  routes."  -* 

Sc  much  for  French  penetration  of  Yunnan.  French 
ambitions  were  also  reaching  towards  railway  enterprise 
in  Kwangsi,  Kwangtung,  and  Szechuan.  Especially 
Szechuan  was  earmarked  for  railroad  exploitation.  M. 
Doumer  considered  that  the  Laokai- Yunnan fu  line  would 
only  demonstrate  its  true  value  when  continued  to 
Chengtu  via  Chungking.  .And  the  French  Minister 
actually  secured  from  China  the  right  to  construct  the 
Yunnun-Szechuan  railway  for  French  interests.*'  Thus 
France  gained  for  the  loss  of  her  share  in  the  Pukow- 
Sinyang  line.  "  At  Chengtu  she  would  link  up  with  the 
'Great  achievement'  of  the  Russo-Belgian  combina- 
tion, thus  clasping  hands  across  China  with  her  ally  on 
the  north,  and  also  would  have  the  control  of  a  large 

'">  See  Douglas,  op.  cit.,  page  387. 

"  .See  "  Far  Eastern  Review,"  Vol  9,  page  167. 

■'  See  "  Far  Eastern  Review,"  Vol.  10,  page  304. 


134      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

section  of  the  line  eastwards  to  the  Hupeh  border  as 
provided  for  in  the  Paris  meetings  of  the  Hukuang 
negotiations."  ^^ 

Aside  from  this  line  various  other  railways  were 
planned  and  partly  conceded  by  China.^*  But  only  a  few 
of  these  will  stand  a  chance  of  eventual  construction. 
The  most  important  of  the  Franco-Russian -Belgian  com- 
bination in  which  the  French  had  a  share  of  three-fifths 
of  the  capital,  was  the  Peking-Hankow  line."  We  have 
seen  that  the  terms  of  this  concession  were  as  favorable 
to  the  Chinese  as  the  terms  of  the  British  concessions. 
They  were  purely  financial. 

The  policy  of  France  as  far  as  the  entire  Far  East 
is  concerned  was  dominated  by  France's  European 
policy  which  stood  under  the  sign  of  the  Russo-French 
Entente.  The  French  nation  is  the  great  creditor  of 
Russia  and  served  as  such,  together  with  Belgium,  as 
financial  agent  for  Russian  schemes  in  the  Far  East. 
The  first  joint  financial  enterprise  was  the  Franco-Rus- 
sian Government  Chino-Japanese  War  Indemnity  Loan 
of  400,000,000  francs,  contracted  in  1895.  The  m.oney 
was  almost  exclus"  vely  subscribed  in  France.  The  first 
French  railway  loan  contracted  with  Russian  proclivities, 
as  we  have  seen,  was  the  Peking-Hankow  line  designed 

**  See  ibidem. 
"Sec   Rockhill,  op. 
China,"  Chapter  VXl. 
2»  See  "  Far  Eastern  Review,"  Vol.  10,  page  292. 


•■it..   No.   59,  "Kent   Railway   Enterprise  in 


"^'i 


FRANCE 


135 


to  assist  the  achievement  of  the  long  cherished  ambi- 
tion of  France  to  join  hands  across  China  with  her  great 
northern  ally,  Russia.  Another  Franco-Russian  com- 
bination was  the  Shansi  Railway  Loan,  contracted  by 
the  Russo-Chinese  Bank  and  floated  in  France.''*  In 
1903,  the  French  and  Belgians  financed  the  Kaifenfu- 
Honan  Railway,  with  Li, 000,000,  a  supplementary  loan 
of  L640,ooo  having  been  floated  in  1907.  Both  these 
latter  railways  and  the  French  Taynan-'^'.engting  line 
serve  as  feeders  to  the  Peking-Hankow  lire.  Another 
project  of  the  Franco-Russian-Belgian  coniLinatlon  is  the 
Lung-Tsing-U-Hai  line  from  Lanchow  to  Tungchow. 
The  possibility  of  an  early  construction  of  most  of  the 
recent  projects  is  very  remote. 

Finally  French  financiers  participated  with  England, 
Germany,  and  America  in  the  Four  Power  Negotiations, 
which  will  be  a  subject  of  investigation  in  Chapter  VIII. 
France  was  to  build  the  Kweichow-Chungking-Chengtu 
section  as  an  extension  to  the  sc-cailed  Hukuang  system. 
According  to  the  Far  Eastern  Rcz'iczv:  "  The  financial 
arrangements  will  be  equally  shared  by  the  four  groups, 
but  the  French  will  benefit  principally  in  the  matter  of 
construction  as  no  share  of  the  construction  of  the  sys- 
tem provided  for  by  the  Hukuang  Agreement  was 
allotted  to  them."  " 

»«  See  "  Far  Eastern  Review,"  Vol.  10,  page  294. 
•T  Sec  "  Far  Eastern  Review,"  Vol.  9,  page  305. 


I  f 


136      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

In  concluding  this  chapter  we  want  to  remark  that 
France,  in  attainment  of  her  political  ends,  finds  con- 
siderable aid  through  a  close  cooperation  between  her 
foreign  finance  and  her  foreign  policy.  Or,  as  Bland 
expresses  it :  "  In  France,  where  cosmopolitan  finance 
has  attained  its  highest  form  of  organization,  the  Gov- 
ernment has  long  since  recognized  the  necessity  for 
safeguarding  the  interests  of  French  rentiers  and  at  the 
same  time  for  controlling  capital  as  a  source  of  national 
strength,  by  legislation  which  virtually  prevents  any 
Fiench  loan  from  going  abroad  without  the  full  knowl- 
edge and  approval  of  the  French  Government."" 

In  this  direction  France  finds  herself  only  surpassed 
by  Germany  and  Japan,  in  which  countries  the  coordina- 
tion between  political  and  financial  activities  is  even 
closer  and  is  not  directed  towards  aiding  the  political 
designs  of  an  ally  but  is  employed  to  strictly  national 
ends. 

-*  See  Bland,  op.  cit.,  page  287. 


ijk-y'"'.jsmr^\-r.£m 


•itrsxMtSL':iMr 


W. 


CHAPTER  V 


GERMANY 


The  rise  of  Germany  on  the  Chinese  horizon  is  of 
quite  recent  date.  Suggestions  for  the  acquisition  of  a 
port  on  the  Chinese  seaboard  had  been  made  by  German 
traders  on  various  occasions,  and  political  relations  have 
existed  between  the  two  countries  since  1861.  Treaties 
were  concluded  in  this  year  and  in  1880.  But  nothing 
was  accomplished  in  the  direction  of  gaining  a  foot- 
hold in  China  until  Kiaochau  was  occupied  in  1897-98. 

The  occupation  of  Kiaochau  had  been  decided  upon  in 
principle  in  1896.  Kent  summarizes  the  events  leading 
up  to  the  occupation  as  follows :  *  "In  that  year  —  189  s 
—  it  will  be  remembered,  Li  Hung  Chang  paid  his  cele- 
brated visit  to  Moscow,  being  present  at  the  coronation 
festivities  of  the  present  Tsar.  On  his  return  he  passed 
through  Germany.  It  was  suspected  at  the  time  that 
Russia  had  secured  valuable  rights  in  North  China  and 
Manchuria.  On  being  pressed  Li  Hung  Chang  stead- 
fastly denied  that  this  was  so.  Shortly  after  he  had  left 
the  country,  however,  the  German  Government  received 

*  Sec  Kent,  op.  cit.,  page  140. 

53/- 


ff^TSM£-''^7 


138      FOREIGN  "INANCIAL  CONTROL  IN  CHINA 

certain  information  that  their  suspicions  had  been  cor- 
rect. Thereupon  Kiaochau,  in  anticipation  of  Russian 
aims,  was  mentally  earmarked  as  a  future  territorial 
acquisition  of  Germany,  who  was  badly  in  need  of  a 
naval  station  in  Chinese  waters,  with  the  province  of 
Shantung  as  their  sphere  of  influence." 

The  opportunity  to  act  upon  this  decision  arrived  in 
November,   1897,  when  two  German  missionaries  were 
murdered  in  the  province  of  Shantung.     Immediately  the 
incident  became  known,  a  German  squadron  anchored 
off  the  harbor  of  Kiaochau  and  landed  troops,  which 
occupied  the  town  of  that  name.     After  a  series  of 
negotiations,  Germany  demanded  and  achieved  the  lease 
of  Kiaochau  for  the  purpose  of  a  naval  base,  supposedly 
in  compensation  and  guarantee  for  the  crime.     The  ces- 
sion found  its  expression  in  the  convention  of  Peking  on 
March  6,  1898:2     "  With  the  intention  of  meeting  the 
legitimate  desire  of  His  Majesty,  the  German  Emperor, 
that  Germany,  like  other  powers,  should  hold  a  place 
on  the  Chinese  coast  for  the  repair  and  equipment  of  her 
ships,  for  the  storage  of  materials  and  provisions  for  the 
same,  and  for  other  arrangements  connected  herewith. 
His  Majesty  the  Emperor  of  China  cedes  to  Germany 
on  lease,  provisionally  for  ninety-nine  years,  both  sides 
of  the  entrance  of  the  Bay  of  Kiaochau." 

!«See   Rockhill,   op.  cit.,   No.   8.     See  also   ReichsanzeiKer.   Aoril 
29th,  1898. 


^■\i^w^mL 


GERMANY 


^39 


It  may  be  said  that  to  Germany,  perhaps,  more  than 
to  any  other  country,  the  future  of  China  at  that  period 
was  indifferent.  While  ready  to  commit  herself  to  the 
"  Open  Door  "  she  also  was  prepared  to  h  -nefit  by  the 
"  Sphere  of  Interest  "  policy  or  a  d.  •  partition  of 
China  almost  without  preference  as  to  w  jh  prevailed. 
Tile  important  thmg  to  her  was  not  the  policy,  but  the 
benefit.  If  China  attempted  reconstruction.  Germany 
was  ready  to  lend  her  assistance.  A  strong  China  to  her 
would  be  able  to  act  as  counterpoise  to  Russia,  Great 
Britain,  France  and  Japan.  Should,  however,  the  long 
threatened  break-up  of  China  become  imminent,  Tsing- 
tau,  the  capital  of  Kiaochau,  immediately  became  the 
kernel  for  a  future  German  colony  in  the  Far  East. 
And  Germany  would  have  had  her  "  place  in  the  sun  " 
in  that  part  of  the  globe. 

This  policy  of  foresight  and  precaution  was  summar- 
ized by  Baron  von  Bulow  shortly  after  the  cession  of 
Kiaochau :  "  Es  ist  von  der  Aufteilung  von  China 
gesprochen  worden.  Fine  solche  Aufteilung  wiirde 
jedenfalls  nicht  von  uns  ausgegangen  sein ;  wir  haben  nur 
beizeiten  daftir  gesorgt.  dass  wir,  was  auch  kommen 
moge.  nicht  ganz  leer  ausgehen.  Wann  sich  ein  Eisen- 
bahnzug  in  Bewegung  setzt  hangt  nicht  immer  von  dem 
Belieben  des  Reisenden  ab.  wohl  aber.  dass  er  nicht  den 
Anschluss  versaumt.  Den  letzten  beissen  die  Hunde. 
Wir  wiinschen  aber  nicht  —  und  das  mochte  ich  mit 


I40      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

besonderem    xVachdruck   betonen-.    dass   es   zu   einer 
Aufteilung    des    Chinesischen     Reiches    komme.     Ich 
glaube  auch  heute  noch  dass  es  zu  einer  solchen  Aufteil- 
ung in  absehbarer  Zeit  nicht  kommen  wird.     Jedenfalls 
haben  wir—  und  damit  nieine  ich  am  besten  sowohl  die 
Griinde.  welche  uns  nach  Kiaochau  gefuhrt  haben,  als 
die  Bedeutung  von  Kiaochau  fiir  uns  zusammen-zufassen 
—  in  Kiaochau  eine  strategische  und  politische  Position 
gewonnen.  die  uns  einen  bestimmenden  Einfluss  auf  die 
kunftigen    Geschicke    Ostasiens    sichert.     Von    diesem 
festen  Punkte  aus  konnen  wir  die  weitere  Entwicklung 
der  Dinge  mit  Ruhe  und   mit   Gelassenheit  abvvarten. 
Wir  haben  eine  so  grosse  Aktionssphare  vor  uns  und  so 
bedeutsame  Aufgaben,  dass  wir  andere  Machte  urn  die 
ihnen    gemachten    Zugestiindnisse    nicht    zu    beneiden 
brauchen.     Die  deutsche  auswartige   Politik  wird,   wie 
iiberall.  so  auch  in  Ostasien,  ihren  Weg  ruhig,  test  und 
friedhch  y.u  verfolgen  wissen.     Den  Storenfried  werden 
wir    nirgends    spielen.    das    Aschenbrodel    aber    auch 
nicht."  -^ 

'  See  Petuler.  ;•  Fiirst  Biilow's  Reden,"  Berlin.  1907.  page  30  An 
English  text  ,s  given  in  "China."  No.  i,  ,898.  Vol.  CV  No  %  and 
reads  as  follows:  "Mention  has  been  made  of  the  partition  of 
Se  ,U  U  ""^T  "•  "'"  ""»  ''^  '''■°"«»'t  «'^«"»  hy  „s  at  any 
sehes  shall  not  go  empty-handed.    The  traveler  ^annot  decide  when 

dLZZf'"  T^'T'-f'",''"  'V  ""^^^  ■""^'^  '    '    -^  '"i^"  i»  when  it 
does  start.    The  dev,l  takes  the  hindmost.     E;t    we  do  not  desire 

-and  I  beg  to  impress  this  point  on  you -we  d,.  not  desire  a  par- 

nlZl.r     ?'"';  *"1-  ^-  ^"^  ""^  *'"""'■"  '^^'  '^^"^  '^  >"  immediate 
prospect  ot  such  a  division.     But  in  any  case  (and  here.  I  think    I 


GERMANY 


141 


The  German  demands   following  the  occupation  of 
Kiaochau  naturally  included  a  railway  concession  as  one 
of  the  principal  objects  of  the  occupation.     The  lease 
of  Kiaochau  and  a  section  of  the  hinterland,  signed  on 
the  6th  of  March.  1898.  was  followed  by  a  railway  con- 
vention of  the  same  date  under  which  the  following  pro- 
visions   are    made:*     "I.  The    Chinese    Government 
s:!nctions  the  construction  by  Germany  of  two  lines  of 
railway  in  Shantung.     The  first  will  run  from  Kiaochau 
and  Tsinan-fu  to  the  boundary  of  Shantung  province  via 
Weihsien,   Tsinchow,    Pashan,   Tsechuen   and   Suiping. 
The  second  line  will  connect  Kiaochau  with  Chinchow, 
whence   an    extension    will   be   constructed    to    Tsinan 
through  Laiwuhsien.     The  construction  of  this  extension 
shall  not  be  begun  until  the  first  part  of  the  line,  the 
main  line,  is  completed,  in  order  to  give  the  Chinese  an 
opportunity  of  connecting  this  line  in  the  most  advan- 
tageous manner  with  their  own  railway  system. 

"II.  In  order  to  carry  out  the  above  mentioned  rail- 
can  best  resume  the  advantages  secured  to  us  by  the  occupation  of 
the  port,  as  well  as  the  reasons  which  induced  it) ;  in  any  case  I 
say.  we  have  secured  in  Kiaochau  a  strategical  and  political  posi- 
Uon  which  assures  us  a  decisive  influence  on  the  future  of  the  Far 
tast.  From  this  strong  position  we  can  look  with  complacency  on 
the  development  of  affairs.  We  have  such  a  large  sphere  of  action 
and  such  imiiortant  tasks  before  us  that  we  have  no  occasion  to 
grudge  other  nations  the  concessions  made  them.  German  diplo- 
macy will  pursue  its  path  in  the  East  as  everywhere  else  — calmly 
firmly,  and  peacefully.  We  will  never  play  the  part  of  mischief- 
maker,  nor  will  we  play  that  of  Cinderella." 
♦  See  Rockhill,  op.  cit..  No.  8. 


142      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

way  work  a  Chino-German  Company  shall  be  formed, 
with  branches  at  whatever  places  may  be  necessary,  and 
in  this  Company  both  German  and  Chinese  subjects  shall 
be  at  liberty  to  invest  money,  if  they  so  choose,  and 
appoint  directors  for  the  management  of  the  undertak- 
mg."     Article  III  provides  among  other  things  that  "  the 
object  of  constructing  these  lines  is  solely  the  develop- 
ment of  commerce.     In  inaugurating  a  railway  system 
in  Shantung,  Germany  entertains  no  treacherous  inten- 
tion towards  China,  and  undertakes  not  to  unlawfully 
seize  any  land  in  the  province."     In  conformity  with  the 
spirit  of   this   provision:     "The   Chinese   Government 
binds  itself  in  all  cases  where  foreign  assistance,  in  per- 
sons, capital  or  material,  may  Ije  needed  for  any  purpose 
whatever  within  the  Province  of  Shantung  to  oflFer  the 
said  work  or  supplying  of  materials,  in  the  first  instance 
to  German  manufacturers  and  merchants  engaged   in 
undertakings  of  the  kind  in  question." 

Following  the  acquisition  of  these  rights  Kiaochau 
was  established  as  a  commercial  and  strategic  "point 
d'appui."  The  place  was  immediately  declared  open  to 
foreign  trade  without  distinction  of  nationality  and  an 
official  report  to  the  German  Reichstag  announced  that 
no  duties  would  be  levied  in  the  port  of  Kiaochau  upon 
goods  intended  for  consumption  in  German  territory,  ex- 
cepting the  excise  duty  on  opium.' 

"  See  Monthly  summary  of  Commerce  and  1  inance   U   S   Treas- 
ury Dept.  Series,  iggt^-igoo.  Nos.  321.  323  b..  Dec,  1899. 


'•^H^ 


GERMANY 


143 


Furthermore  in  accordance  with  above  mentioned 
convention  the  Chancellor  of  the  Empire  o;  the  first 
of  June,  1899,  granted  the  concession  for  the  construction 
and  management  of  a  railway  from  Tsingtau  via  VVeih- 
sien  to  Tsinan  I'u,  the  provincial  metropolis  of  Shantung, 
with  a  branch  line  to  Poshan  to  a  syndicate  closely  con- 
nected with  the  Deutsch  Asiatische  Bank  and  represent- 
ing a  wide  circle  of  German  industries  and  mercantile 
interests.  This  company  was  organized  on  the  14th  of 
June,  1899,  as  The  Shantung  Railway  Co.,  with  head- 
quarters in  Berlin."  The  capital  was  to  lie  54.000,000 
marks. 

The  company  was  to  be  a  German-Chinese  Company. 
"  Care  is  to  be  taken  that  Germans  as  well  as  Chinese 
may  participate  in  the  public  subscription  to  the  stock  of 
the  Company.  More  especially,  shall  subscriptions  be 
opened  in  the  suitable  commercial  centers  of  East  Asia, 
and  the  amounts  tliere  subscribed  shall  receive  proper 
consideration." 

"  The  election  of  the  President  of  the  Board  of  Direc- 
tors as  well  as  the  Chief  Operating  Official  must  be 
approved  by  the  Imperial  Government." 

"  German  material  shall  be  used,  as  far  as  possible,  in 
the  construction  of  the  railways." 

"  The  railway  is  to  be  equipped  in  due  time  with  roll- 
ing stock  according  to  the  requirements  of  traffic.     The 
"  See  Rockhill,  op.  cit.,  No.  52. 


144      I OKHIGX  MXANCIAL  CONTROL  1\  CHIN  \ 

material  used  shall  be.  as  far  as  possible,  of  German 
origin." 

Several  art  •  .  provide  for  a  control  by  the  Governor 
of  Kiaochau  over  the  number  of  trains,  fixing  tariff  and 
rates,  .\rticle  VI  authorizes  the  Imperial  Government  in 
case  of  such  culpable  action  of  the  Company  relative  to 
one  of  the  imposed  obligations  contained  in  the  docu- 
ment, as  should  result  in  the  railway's  not  being  con- 
simcted  or  operated  in  due  course,  "  to  take  over  itself 
or  cause  to  be  taken  over  by  a  third  party,  the  construc- 
tion or  extension  of  the  railway  and  the  organization  or 
continuation  of  the  traffic,  all  at  the  expense  of  the  com- 
pany." 

Article  X  gives  the  Company  the  option  until  the  end 
of  1908  to  construct  a  railway  from  Tsinan  to  Ichow  and 
from  T  ingtau  to  Ichow,  thus  forming  a  triangle  of  rail- 
ways covering  all  of  the  Province  of  Shantung.     A  -tide 
XI  provides  for  a  contribution  from  the  yearly  net  profits 
of  the  railway  to  be  applied  to  the  expenditures  of  the 
Government  of  Kiaochau,  which  contribution  is  to  be 
estimated  as    follows:     "If   after  the  opening  of   the 
traffic  of  the  railway  from  Tsingtau  to  Tsinan,  the  net 
earnings  of  the  railway  would  permit  the  payment  of 
i  yearly  dividend  of  more  than  5  per  cent,  of  the  paid- 
up  capital  which  is  used  in  operating  the  railway,  there 
shall  be  paid  into  the  Government-funds  of  Kiaochau 
the  twentieth  part  of  any  surplus  over  5  to  7  per  cent.. 


GERMANY 


145 


the  tenth  part  of  any  surplus  over  7  to   ^  per  cent,  and 
so  forth.      .  ." 

In  Article  XII  '*  The  Imperial  Goverm  icnt  reserves  the 
right  to  purchase  the  railways  to  be  constructed  by  the 
company  in  accordance  with  this  concession  after  the  end 
of  sixty  years,  calculated  from  the  dae  of  the  grant  of 
the  concession.  The  Imperial  Government  further 
reserves  th<*  right  to  buy  at  the  end  of  every  five  years, 
including  a  one  year's  previous  notice,  all  establishments, 
rolling  stock,  appurtenances,  inclusive  of  the  reser\'e  and 
renewal  funds  earned  by  the  railway  enterprise,  upon 
payment  of  twenty-five  times  the  amount  of  the  average 
dividends  paid  during  the  last  five  years  from  its  earn- 
ings, or.  at  least,  however,  the  commercial  value  of  the 
act!  .'  existing  railway  plants,  workshops  and  rolling 
stock." 

The  Gen  <■,.  ■  ny  lu:  in  Shantung,  it  may  be  finally 
remarked,  ia  -ril;  line  of  which  China  has  not  secured 
the  right,  sf .  :  =;•:>  or  another,  to  as«om<!'  the  sole  con- 
trol. 

In  addition  to  or  better,  based  upon  these  specific  rail- 
way rights,  (lermany  secured  the  ii -minating  voice  in  the 
Province  of  Shai  ..v.g  with  regard  to  employment  of 
foreign  capital,  considering  Shantung  and  adjacent  terri- 
tories as  her  "  sphere  of  interest."  The  first  step 
towards  a  recognition  of  •  German  sphere  was  the  Ger- 
man   participation    in    the       'cntsin-Chinkiang.    respec- 


m6    foreign  financial  control  in  ch^a 

lively  —  Pukow  Railway  following  the  German  Minis- 
ter's claim  that  the  Shantung  section  of  this  line  should 
be  German."  The  Cierman  sphere  of  interest  found  con- 
firmation by  an  arrangement  between  the  British  and 
German  capitalists  concerne<l.  It  estimated  the  Ger- 
man sphere  of  interest  to  be:  The  peninsula  of  Shan- 
tung and  the  Hoangho  Valley  with  connection  to  Tientsin 
and  Chengting,  or  other  point  of  the  Peking-Hankow 
line,  in  the  south  with  connection  to  the  Ya  gtze  at 
Chinkiang  or  Nanking.  The  Hoangho  Valley  is  under- 
stood to  be  subject  to  the  connecting  lines  in  Shansi 
forming  part  of  the  British  sphere  of  interest,  and  to 
the  connecting  line  to  the  Yangtze  Valley,  also  belong- 
ing to  the  said  sphere  of  interest." 

German  control  witiiin  the  German  sphere  is  based 
upon  the  railroad  concession  in  Shantung.  At  first 
sight,  the  principal  control  provisions  quoted  above  show 
a  similarity  of  German  control  to  that  exercised  by 
France  and  Russia.  The  concession  was  granted  to  the 
German  Government,  which,  in  turn,  designated  leading 
German  financial  interests,  united  in  the  Deutsch- 
Asiatische  Bank,  to  form  a  railroad  company  for  the 
actual  construction  of  railways  within  the  sphere.  Since 
this  Company  is  a  private  concern,  the  control  provisions 
are  nominally  financial.  But  the  final  supervision  over 
traffic,  tariff,  and  rates  as  well  as  the  share  in  profits  by 
^  See  above,  page  45.  *  Sec  above,  page  46. 


GERMANY 


147 


the  Government  of  Kiaochau,  and  the  provision,  that  the 
line,  under  certain  conditions,  may  or  shall  be  taken  over 
by  the  Imperial  Government  shows  that  German  control 
is  also  political.  Indeed,  as  Prince  Bulow  has  suggested 
in  his  speech,  the  railroads  extending  from  Kiaochau 
could  be  considered  the  first  step  towards  German  colon- 
ization in  China,  in  case  other  Powers  should  set  the 
example.  Nevertheless  German  control  differs  in  so  far 
from  Russian  control,  as  Germany  has  taken  no  direct 
steps  towards  establishing  a  political  influence  such 
as  \,as  contemplated  by  Russia  in  Manchuria  previous 
to  the  Russo-Japanese  War.  Neither  has  Germany,  by 
rates  or  any  other  means,  discriminated  against  the  free 
enjoyment  of  the  treaty  rights  of  other  nationals  within 
her  sphere. 

Germany  considered  Shantung  as  a  field  for  commer- 
cial exploitation  —  much  as  England  considered  her 
sphere  in  the  Yangtze  in  the  light  of  its  economic  possi- 
bilities. Both  Powers,  though  alive  to  a  possible  parti- 
tion of  China,  had  the  political  independence  and  terri- 
torial integrity  of  China  in  mind.  German  and  English 
policy  found  its  expression  in  a  mutual  Agreement,  con- 
cluded during  the  Boxer  troubles,  namely  on  Oct.  i6th, 
1900.     The  agreement  reads :  " 

I.  "  It  is  a  matter  of  joint  and  permanent  international 
interest  that  the  ports  on  the  rivers  and  littoral  of  China 
•  See  Kockhill,  op.  cit.,  No.  14. 


148      lORI-ir.X  FIXAXCIAL  CONTROL  IN  CHINA 

should  remain  free  and  open  to  trade  and  to  every  other 
legitimate  form  of  economic  activity  for  the  nationals 
of  all  countries  without  distinction;  and  the  two  Gov- 
ernments agree  on  their  part  to  uphold  the  same  for  all 
Chinese  territory  as  far  as  they  can  exercise  influence. 

2.  "  Her  Britannic  Majesty's  Government  and  the 
Imperial  German  Government  will  not,  on  their  part, 
make  use  of  the  present  complication  to  obtain  for  them- 
selves any  territorial  advantages  in  Chinese  dominions, 
and  will  direct  their  policy  towards  maintaining  un- 
diminished the  territorial  condition  of  the  Chinese  Em- 
pire. 

3.  "  In  case  of  another  Power  making  use  of  the  com- 
plications in  China  in  order  to  obtain  under  any  fomi 
whatever  such  territorial  advantages,  the  two  contracting 
Parlies  reserve  to  themselves  to  come  to  a  preliminary 
understanding  as  to  the  eventual  steps  to  be  taken  for  the 
protection  of  their  own  interests  in  China." 

To  Germany  Kiaochau  was  the  economic  key  to  Shan- 
tung and  Shantung  the  economic  key  to  northern  China. 
On  the  completion  of  the  Tsingtau-Tsinanfu  Railway 
Ormany  endeavored  to  derive  the  full  pectmiary  ad- 
vantages of  her  monopoly.  To  quote  the  far  Eastern 
Rc-incii':  "  When  Tientsin  is  closed  b\  ice  during  the 
winter  months  the  export  trade  of  North  China  is 
paralyzed,  with  the  exception  of  the  small  volume  which 
finds  its  way  out  of  the  harbor  of  Chinwangtao.     A 


GERMANY 


149 


glance  at  the  map  will  show  that  much  of  the  trade  now 
enjoyed  by  Tientsin,  could  be  diverted  to  Tsingtao  with 
considerable  advantage  to  a  vast  section  of  North  Cteina. 
and  consequent  profit  to  Germany.     'Jhe  construction  of 
any  line  or  lines  connectin.u:  the  Xorthern  or  German 
Section  of  the  Tientsin-Pukow  with  the  Peking-Hankow 
Railway,  would  create  a  revolution  in  the  old  established 
channels  of  trade,  and  instead  of  flowing  northwards  to 
Peking  and  then  down  again  to  Tientsin  the  products  of 
Southern  Chihli,  Shansi,  Shensi  and  Honan  would  fol- 
low the  shortest  and  most  direct  route  to  the  sea,  over 
the  German  lines  to  Tsingtao."     German  diplomacy  has 
been  keenly  alive  to  this  fact,  and  the  German  Mmister 
has  on  several  occasions  approached  the  Chinese  Govern- 
ment to  secure  a  concession  to  construct  a  line  to  con- 
nect Chengtingfu  with  Techow  and  Kaifeng  with  ^en- 
chow.     According  to  Mr.   P.  C.  Kent,  in  his  valuable 
book  on  "  Railway  Enterprise  in  China  " :  "  the  German 
Minister  has  only  succeeded   in  arriving  at  an  under- 
standing with  the  Chinese  Government  to  the  effect  that 
in  the  event  of  the  Chinese  Government  deciding  upon 
the  construction  of  these  lines  and  requiring  the  assist- 
ance   of    foreign    capital,    German    capitalists    will    be 
allowed  the  first  refusal  of  the  Concession.     A  glance  at 
the  map  is  sufficient  to  inuicate  the  commercial  import- 
ance of  these  railways  to  Shantung  and  Tsingtao.  .  .  . 
With  the  thoroughness  characterizing  her  foreign  trade 


iE 


I50      lUKI.ir.N  FINAXCIAL  CONTROL  IX  CHINA 

policy,  Germany  has  carefully  protected  and  insured  her 
position  in  Shantung,  and  as  the  construction  of  these 
lines  will  ultimately  become  imperative  for  the  develop- 
ment of  China,  she  may  well  afford  to  bide  her  time  with 
the  calm  assurance  that  her  plans  will  mature.  Her 
position  is  further  safeguarded  by  the  terms  of  the 
Tientsin-Pukow  Loan  Agreement,  Clause  19  of  which 
reads :  Branch  lines  in  connection  with  the  railway  line 
mentioned  in  this  Agreement  may  l)e  built  by  the  Im- 
perial Chinese  Government  with  funds  at  their  disposal 
from  Chinese  sources,  if  thought  advisable,  and  if 
foreign  capital  is  required  preference  will  be  given  the 
Syndicate."  '" 

In  19 1 3  Germany  made  another  step  forward.  On 
December  3rst  of  that  year,  a  preliminary  agreement 
was  signed  between  China  and  Germany  for  the  con- 
struction of  two  new  railways  in  Shantung  province,  one 
from  Kaomi,  west  of  Tsingtau.  to  Ichowfu  and  Han- 
chuang.  on  the  railway  line  connecting  Pukow  with 
Tientsin,  and  the  other  from  Tsinanfu  to  some  point 
on  the  Peking-Hankow  Railway.  In  the  final  agree- 
ment the  line  from  Kaomi  was  to  run  to  Hsuchowfu 
and  to  form  a  junction  with  the  Tientsin-Pukow  Rail- 
road. "  Under  the  Kiaochovv  Convention  of  March  6. 
1898,  China  conceded  Germany  the  right  to  build  rail- 
ways in  Shantung  under  German  Company  laws,  and 
'"  See  "  Far  Eastern  Review."  Vol.  9.  page  156. 


GERMANY 


151 


while  ihe  railroad  from  the  port  of  Tsingtau  to  Tsinanfu 
was  so  constructed,  Germany  decided  not  to  follow  the 
same  practice  in  the  future,  agreeing  to  forego  the 
privileges  in  that  direction  and  permitting  China  to  build 
the  lines  upon  conditions  similar  to  those  under  which 
other  railroads  have  been  constructed."  These  new 
lines  then  were  to  be  Chinese-state-owned,  but  German 
capital  and  materials  were  to  be  employed  in  their  con- 
struction and  the  Chief  Engineer  and  the  General 
Manager  were  to  be  German  subjects."  A  construction 
of  these  lines  in  the  near  future  is  of  course  very  un- 
likely. 

The  comparatively  large  and  speedy  successes  of  Ger- 
man finance  in  China  were,  last  not  least,  due  to  the 
forward  methods  of  the  German  bankers.  German 
finance  and  industry  are  more  highly  organized  and 
coordinated  to  the  specific  purpose  of  extending  national 
interests  abroad  than  is  the  case  with  any  other  power 
in  the  world.  And  at  the  same  time  German  diplomacy, 
in  cooperation  with  German  industry  and  finance,  is 
striving  to  extend  and  promote  the  trade  secured  by  the 
foresight  of  German  business  men.  "  Not  only  does 
the  German  Foreign  Office  keep  in  touch  with  the  move- 
ments of  its  financiers  abroad  .  .  .  but  it  has 
come  to  pass,  as  part  of  a  regularly  organized  system, 

«»  See  "  Far  Eastern  Review,"  Vol.  11,  page  18.    See  also  Vol.  10 
Dec.,  1913. 


Ii 


15.'      FUKHJGN  KIXANXIAL  CONTROL  IN  CHINA 

that  all  the  great  financial  industries  are  directly  asso- 
ciated with  groups  of  manufacturers  and  industrialists, 
so  that  the  whole  force  of  politics,  industries  and  finance 
moves  forward,  along  predetermined  lines,  to  a  common 
goal."  '2  This  goal  is  the  extension  of  markets  for  Ger- 
man  goods  and  the  purpose  of  German  foreign  invest- 
ment within  such  markets  is  to  help  home  enterprise. 

That  the  participation  of  German  banks  in  industrial 
enterprises  and  in  capital  investments  abroad  has  to  be 
concentrated  upon  exclusively  German  success  is  main- 
tained by  all  the  foremost  German  authorities  on  finance. 
K'.e.ser  says:  >^     '•  Internationale  Geschiiftsl>eziehungen 
und  internationale  Emissionen  durfen  immer  nur  Mittel 
zur  Erreichung  nationaler  Ziele  sein  und  mussen  sich  in 
den  Dienst  der  nationalen  Arbeit  stellen."     And  in  Wal- 
tershausen's  book   "  Kapitalsanlagen   im   Ausland  "   we 
find  the  following  passages:  '*     "  Eur  die  Zukunft  der 
dcutschen  Volkswirtschaft  ist  es  von  Wichtigkeit.  dass 
der  Kapitalsexport  planmassig  im  nationalen  Sinn  ge- 
leitet  wird.  .      ."     "Die  Auslandsbanken.  obwohl  Er- 
werbsinstitute.  iibemehmen  mit  ihrer  Tatigkeit  national- 
wirtschaftliciie   Funktionen   zugunsten  des   Waren  und 
Kapitalsexports."     And    in    order   to   illustrate   that   a 

loT^"  Bland,  op.  cit.  page  387.     See  also  Withers,  op.  cit..  page 


'•See  J    Riesser.  "Die  dei.tschen  Grossbanken."  page  293 
'*See   Sartorms   von   Waltershausen.  "  Kapitalsanlagen  in 


land,"  page  293. 


m    Atis- 


"i-s*? 


iifjdT-:s^ 


teisHti 


GERMANY 


153 


monarchical  form  of  Government  like  the  German  i», 
according  to  German  opinion,  best  fitted  for  carrying 
out  a  broad  national  foreign  policy  we  quote  a  passage 
from  Treitschke :  '"'  "  Der  Konig  kann  sehr  viel  gen- 
auer  beurteilen,  wie  es  in  der  Welt  draussen  wirklich 
steht,  als  der  einzelne  Untertan  oder  auch  eine  republi- 
canische  Parteiregierung.  Eine  weit  in  die  Zukunft 
rechnende  Politik  wird  nur  dem  moglich  sein,  der  wirk- 
lich in  Zentrum  steht." 

It  was  then  to  the  specific  purpose  of  preserving  and 
expanding  markets  for  German  industry  thai  a  number 
of  leading  financial  institutes  as  early  as  1889  founded 
the  Deutsch-Asiatische  Bank,  which  we  have  mentioned 
before.  The  formation  of  a  group  or  syndicate  for 
Asiatic  business  in  1890  was  the  natural  consequence  of 
the  establishment  of  the  bank.'°  The  purpose  of  the 
syndicate  was  to  be  concerted  underwriting  of  state  and 
provincial  and  railway  loans  in  China,  Japan  and  Korea 
and  the  establishment  of  railroad  and  mining  companies. 
The  spirit  that  animated  the  syndicate  may  be  illustrated 
by  a  further  quotation  of  Riesser :  "  Die  Ubemahme 
von  Anieihen  fiir  China  wurde  ein  Kampfobject  zwischen 
alien  den  Staaten,  die  da  wussten,  dass  in  erster  Linie 
der  financielle  Einfluss  dem  politischen  die  Wege  bahnt." 

One  of  the  first  greater  successes  of  the  syndicate 

'•'  See  Treitschke,  "  Politik,"  II,  page  55. 
'"See  Riesser.  op.  cit..  page  403. 


'54     FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

represented  by   the   Deutsch-Asiatische   Bank   was   the 
cooperation  with  the  British  Hongkong  and  Shanghai 
Bank  m  contracting  one-half  of  the  Chi  no-Japanese  War 
indemnity  loan  of   1896  and   1898.'^     The  two  banks 
furthermore  cooperated  in  1905  i„  the  Exchange  Adjust- 
ment of  the  Boxer  Indemnity   (l^ing  Li.000,000).  in 
1908  and  1909,  in  contracting  the  Imperial  Chinese  Gov- 
ernment Tientsin-Pukow  Railway  Loan  totaling  L5  000  - 
000    of    which    the    Deutsch-Asiatische    Bank    issued 
L13.150.000  -  and  finally  in  1910  in  the  Tientsin-Pukow 
Railway    Supplementary    Loan    of    L4,8oo,ooo.'«     The 
participation    of    the    Syndicate    in    international    loan 
negot.at.ons  will  be  dealt  with  in  the  respective  chapter. 
Though    the   means  of   Germany   deviate   materially 
from  Anglo-Saxon  means  and  therefore  have  even  before 
the  war  provoked  misunderstandings,  there  is  neverthe- 
less to  be  found  a  frequent  financial  cooperation  between 
the  two  countries.     Even  as  late  as  the  spring  of  1914. 
Engl.sh-German   cooperation   in   certain   railway  enter- 
prises was  found  desirable.     The  latest  German  attempt 
to  connect  the  Tientsin-Pukow  Railway  with  i!ie  Peking- 
Hatikow  Railway  was  made  by  a  German  industrial  or- 
gan.zation    apparently    independent    of    the    Deutsch- 
Asiatische   Bank.     Referring  to   this   organization   the 
Par  Eastern  Renew  remarks:     "  The  scheme  is  doubt- 
less .mended  to  comprise  all  the  most  important  German 
'^Sec  Chapter  VIII.  '"  See  Chapter  VII. 


V  IKT.-i. 


GERMANY 


155 


industrial  concerns,  and  there  is  some  reason  to  suppose 
that  it  is  desired  to  secure  English  cooperation.  The 
theory  that  Germany  and  England  are  now  natural 
partners  in  Chinese  business  is  bein,i:  systematically 
propagated."  '" 

British-German  cooperation,  however,  has  been  shat- 
tered through  the  present  war.  The  elimination  of  Ger- 
many's interests  and  "  control  "  in  China  and  the  ap- 
pearance of  Japan  as  the  —  at  least  for  the  time  being 
—  arbiter  of  Eastern  Asia  has  changed  the  whole  aspect 
of  the  Far  Eastern  question. 

'»  See  "  Far  Eastern  Review,"  Vol.  XI.  page  g8. 


IJSy  >^ 


f^,. 


Mt^mmfm 


LHAPTKR  VI 


JAPAN 

Tjie  advance  of  Russia  into  Eastern  Asia  had   for 
many  years  given  rise  to  anxiety  on  the  part  of  Japan, 
whose  island  home  lies  so  close  to  the  shores  of  the  neigh- 
boring continent  that  the  possession  of  the  Asiatic  coast 
line  by  a  strong  Western  Power  would,  it  was  recognized, 
be  a  standing  menace  to  the  independence  of  the  Empire. 
"In    1873    the    Iwakura   embassy    had    ic  iirned    from 
Europe  deeply  impressed  by  the  power  and  activity  of 
the  Westciii   world,   and   especially   by   the   aggressive 
designs  of  Russia.     A  memorandum  drawn  up  by  Okubo 
Toshimichi  declared  that  Russia,  always  pressing  south- 
wards, is  the  chief  peril  for  Japan.     It  is  not  surprising, 
then,   that   the   safeguarding   of   Japanese    interests   in 
Korea    became    the    first    aim    of    Japanese    policy."* 
Japan's  very  .safety  demanded  that  neither  of  her  great 
neighbors.  Russia  and  China,  should  obtain  an  undue 
share  of  influence  in  the  Far  East.     It  was  therefore 
with  some  alarm  that  in   1891  Japan  learned  that  the 
Tsar's  government  had  determined  to  construct  a  line 

'  See  Douglas,  op.  cit.,  pages  101,  igj. 

156 


JAPAN 


^'>; 


of  railway  through  Siberia  to  connect  European  Russia 
with  Vladivostok.  As  a  first  countermove,  Japan,  upon 
realizing  the  designs  of  Russian  policy  and  the  weakness 
of  the  Chinese  Government,  sought  to  establish  Korea 
as  an  independent  state,  the  latter  then  being  under 
Chinese  suzerainty.  But  while  it  was  in  Japan's  interest 
to  strengthen  and  reform  Korea,  it  was  to  China's  in- 
terest to  keep  the  Korean  government  corrupt  and  weak 
and  to  withstand  Japanese  aspirations. 

The  opening  of  the  Korean  (juestion,  then,  marked 
the  beginning  of  a  new  era  of  Chino-Japanese  rela- 
tions. In  this  period  there  are  three  great  events  which 
may  serve  as  landmarks,  namely  the  Chino-Japanese  War 
of  1894-95.  the  Russo-Japanese  War  of  1904-05.  and 
Japan's  participation  in  the  present  world  war. 

Early  in  1894,  a  rebellion  broke  out  in  Korea,  Japan- 
ese troops  occupied  Seoul ,  Korea  renounced  Chinese 
suzerainty,  all  of  which  finally  resulted  in  the  Chino- 
Japanese  War,  at  the  very  beginning  of  which  Japan 
concluded  a  treaty  of  alliance  with  Korea  against  China." 
This  war  may  be  said  to  be  a  direct  outcome  of  Japan's 
resolution  to  reconstruct  Eastern  politics  on  a  modem 
basis  and  of  China's  persistence  in  the  old  methods.  Its 
result  was  a  clear  evidence  of  the  superiority  of  the 
modern  methods  which  Japan  had  adopted. 

The  effects  of  the  war  upon  the  situation  in  the  Orient 
*  Set  Rockhill.  op.  cit.,  page  429. 


m 


MICROCOPY    R£SOlUTION    TEST    CHART 

iMiNoi  and  ISO  TEST  CHART  No    2) 


^     APPLIED  IfVMGE 


^f  >    Iv,-    War    .,,,„, 

•"6)    482-0300-   Phon,'*        -"* 


158      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

were  far-reaching.  Japan's  rise  as  a  modern  nation  in 
the  estimate  of  the  world  may  be  said  to  date  from  this 
time,  especially  since  the  same  year  saw  a  treaty  of  com- 
merce and  navigation  between  England  and  Japan,  which 
serves  as  the  Magna  Charta  of  Japan  in  regard  to  her 
dealings  with  foreign  states. 

The  conclusion  of  peace  by  the  treaty  of  Shimonoseki 
on  the  17th  of  April,  1895,''  was  received  with  universal 
enthusiasm  throughout  Japan.  It  was  realized  that  this 
treaty,  coming  after  the  trimphant  victories  which  had 
everywhere  distinguished  Japanese  arms,  must  place  the 
country  in  the  front  rank  of  nations;  and  the  extension 
of  territory  awarded  by  the  cession  of  the  Liaotung  pen- 
insula and  Formosa  served  to  flatter  the  pride  of  the 
people.  But  when,  a  week  later,  the  joint  protest  against 
the  occupation  of  the  Liaotung  peninsula,  or  any  other 
portion  of  the  mainland  of  China,  made  by  Russia, 
France  and  Germany,  reached  Japan,  the  people  evinced 
the  utmost  indignation.  It  was  realized,  however,  that 
it  would  be  hopeless  to  enter  on  a  contest  with  three 
first-class  Powers,  and,  after  a  moment's  hesitation,  the 
government  decided  to  renounce  the  Liaotung  peninsula, 
and  demand  an  additional  indemnity  of  seven  and  a  half 
million  pounds  sterling  in  its  place.  These  terms  were 
agreed  to  by  China. 

The  lesson  was  not  lost  on  the  Japanese ;  the  humilia- 

*  See  Rockhill,  op.  cit.,  page  14. 


JAPAN 


159 


tion  to  which  they  had  been  subjected,  left  an  indelible 
impression  upon  their  minds;  and  they  at  once  deter- 
mined so  to  strengthen  their  position  as  to  enable  them 
to  hold  their  own  on  all  future  occasions.  They  set  on 
foot  an  elaborate  scheme  of  naval  and  military  expan- 
sion which  it  was  hoped  would  yield  the  expected  results 
within  a  few  years. 

If  the  enforced  surrender  of  the  Liaotung  peninsula 
left  in  the  minds  of  the  Japanese  a  burning  sense  of 
wrong,  subsequent  events  forced  upon  them  the  convic- 
tion that,  sooner  or  later,  Japan  would  have  to  enter  on 
a  life-and-death  struggle  with  the  Muscovite  power. 
Further  machinations  of  Russia  in  Ko'-ea  led  Japan  to 
come  to  agreements  and  to  make  arrangements  relative 
to  the  independence  of  Korea  and  neutral  rights.*  Of 
still  greater  importance  was  the  circumstance  that  the 
absorption  of  Manchuria  by  Russia  had  begun.  The 
greatest  event  in  this  direction  —  and  of  far  reaching 
consequences  —  was  the  taking  of  Port  Arthur;  the 
manner  in  which  Russia  obtained  possession  has  been 
already  described. 

The  news  of  the  lease  produced  a  wild  excitement  in 
Japan.  Not  only  had  Russia  ousted  Japan  by  the  force 
of  specious  pleas,  but  in  direct  conflict  with  those  pleas 
she  had  taken  possession  of  one  of  the  most  hardly-won 
prizes  of  the  late  war.  The  nation  was  stirred  to  its 
*  See  Rockhill.  op.  cit.,  Nos.  67,  68,  6q. 


l6o      FOREIGN  FIXAXCIAL  CONTROL  IX  CHIXA 

depths;  and  it  was  only  by  the  wise  and  wei'hty  pres- 
sure which  was  brought  to  bear  by  the  Elder  Statesmen 
and  the  Government  that  war  was  averted.  Here  again 
Japan  showed  a  great  self-control.  Her  <  nly  answer 
to  Europe's  aggression  on  Chinese  territories  —  of  the 
"  battle  of  concessions  "  —  was  a  demand  on  China  that 
the  province  of  Fuh-kien  opposite  Formosa  shall  not  be 
alienated  to  any  other  government."' 

In  the  troublous  times  to  follow  Japan  had  further 
occasion  to  show  growing  strength,  vigor  and  thorough- 
ness. This  was  especially  the  case  during  the  Boxer 
movemen'^.  the  immediate  consequence  of  which  was  to 
see  Japan's  position  in  regard  to  China  vastly  improved. 
The  most  important  thing  that  contributed  to  this  state 
of  aflfairs  was  the  admirable  behavior  of  the  Japanese 
troops  during  the  occupation  of  Peking,  by  which  Japan 
also  gained  Europe's  admiration. 

To  enumerate  further  successes  of  Japan  in  Korea 
against  Russian  aspirations  and  to  go  into  detail  as  to 
the  immediate  causes  of  the  then  impending  war  is  here 
of  little  interest.  The  main  point  is  that  from  the  day 
on  which  Japan  was  forced  to  forego  the  cession  of 
the  Liaotung  peninsula  as  part  of  the  hard-won  spoils 
of  the  China  war,  she  had  steadfastly  kept  in  view  the 
prospect  of  one  day  having  to  fight  Russia  for  her  na- 
tional existence.  In  the  nine  years  which  had  elapsed 
'^  Sec  Rockhill,  op.  cit.,  No.  26. 


'TJf^S 


■'i9:.^w« 


JAPAN  i6i 

between  the  last  incident  of  the  Chinese  War  she  had 
made  every  preparation  that  human  foresight  and  energy 
could  ensure  to  fit  herself  for  the  conflict  which  her 
statesmen  felt  to  be  inevitable.  Consequently  the  war 
was  a  success. 

Before  treating  the  most  important  and  far  reaching 
consequences  of  the  war  and  the  events  following  it, 
events  which  are  of  particular  interest  to  our  investiga- 
tion, we  have  to  understand  the  motives  and  forces  which 
have  been  at  the  root  of  the  foreign  policy  of  Japan 
and  all  the  great  changes  which  have  taken  place.  At 
the  outset  we  cannot  doubt  that  the  intense  feeling  of 
patriotism  among  the  Japanese  and  the  determination 
to  make  their  country  stand  in  a  position  of  equality 
with  foreign  nations  were  the  most  important  factors 
in  the  movement  which  has  profoundly  changed  all  the 
conditions  of  Japan.  The  great  national  mission  of 
Japan  is,  according  to  Count  Okuma.®  "  to  harmonize 
Eastern  and  Western  civilizations  in  order  to  help  bring 
about  the  unification  of  the  world,  to  effect  a  right  har- 
mony between  its  own  and  the  outside  civilization." 
The  main  ideas  with  which  the  Japanese  started  when 
they  decided  to  adopt  Western  methods  were  embodied 
in  the  principles  proclaimed  on  oath  by  the  late  Emperor 
on  the  occasion  of  his  accession  to  the  throne  on  March 
14,  1868,  the  principal  passage  of  which  reads  as  fol- 
«  Naoichi  Masaoka,  "  Japan's  Message  to  America." 


_^  1^311^^^^ 


162      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

lows :  ^  "  All  purposeless  precedents  and  useless  cus- 
toms being  discarded,  justice  and  righteousness  shall  be 
the  guide  of  all  actions.  .  .  .  Knowledge  and  learning 
shall  be  sought  after  throughout  the  whole  world,  in 
order  that  the  status  of  the  Empire  of  Japan  ma>  be 
raised  ever  higher  and  higher." 

Behind  the  patriotic  motives  there  are  strong  economic 
and  political  forces  which  have  influenced  the  foreign 
policy  of  Japan.  The  rapid  increase  in  population  and 
*  °  necessity  for  outlets  not  only  for  the  surplus  popula- 
tion but  also  for  the  surplus  industrial  products,  has 
been  forcing  Japanese  statesmen  to  consider  the  prob- 
lems involved,  and  like  the  statesmen  of  other  countries 
they  have  sought  th«*m  in  the  settlement  ot  numbers  of 
their  people  in  foreign  countries  and  in  an  extension  of 
their  foreign  markets.  The  development  of  industry  in 
Japan  is  making  the  country  directly  dependent  on  the 
produce  of  other  countries  for  the  food  of  its  population 
and  on  raw  materials. 

Japan's  difificulties  were  increased  through  the  finan- 
cial situation.  Baron  Yamamoto,  minister  of  finance, 
several  years  ago  warned  the  nation  as  follows :  *  "As 
we  are  all  aware,  this  country  bears  a  heavy  burden  of 
foreign  loans  and  has  to  pay  yearly  a  large  amount  of 
money  both  in  principal  and  interest.     To  relieve  this 

"  Henry  Dyer,  "  Dai  Nippon,"  page  27. 

«  Whelpley,  "  The  Trade  of  the  World,"  page  243. 


in 


f)e 


JAPAN  163 

situation,  means  to  be  resorted  to  must  be  those  of  the 
development  of  export  trade,  while  it  is  equally  import- 
ant to  check  the  growth  of  all  that  tends  to  increase  the 
outflow  of  specie  and  to  make  efforts  to  lighten  the  bur- 
den of  national  debt." 

The  whole  industrial  situation  in  Japan  up  to  late 
years  was  critical.  VVhelpley  remarks :  "  "  The  dissem- 
ination of  Western  ideas  and  the  increasing  cost  of  liv- 
ing are  bringing  about  a  state  of  restlessness  and  dis- 
satisfaction potent  with  serious  possibilities.  Industrial 
unrest,  strengthened  by  the  increasing  spirit  of  individual 
freedom  may  ultimately  prove  a  serious  check  to  the  pace 
which  now  marks  the  progress  of  Japanese  foreign  trade. 
Increased  wages,  shorter  hours  of  tabor  and  even  the 
most  elementary  protection  of  women  and  children  now 
working  in  factories  will  threaten  the  present  advantage 
of  the  Japanese  in  the  cost  of  production." 

Reasons  such  as  enumerated  make  it  clear  that  Japan 
found  it  difficult  to  compete  ith  European  and  Ameri- 
can goods  and  all  of  the  circumstances  referred  to  force 
Japan  to  look  towards  the  mainland  of  Eastern  Asia  as 
the  principal  outlet  of  her  goods  and  surplus  population, 
and  as  the  source  of  raw  materials.  The  most  desirable 
outlets  from  a  geographical  position,  sparse-peopled  ter- 
ritory and  undeveloped  resources  are  Korea  and  Mm- 
churia,  a  part  of  Mongolia,  and  probably  Eastern  Sibv^ria, 
»  Whelpley,  op.  cit,  page  253  ff. 


.^IfiA. 


l64      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


while  China  proper  offers  the  multitude  of  people  as  a 
basis  for  a  wide  market. 

All  of  the  circumstances  mentioned  above  furthermore 
may  be  said  to  be  responsible  for  the  tendency  of  Japan 
in  the  earlier  years  of  her  occupation  to  monopolize  such 
parts  of  Manchuria  as  she  held  in  control.  They  also 
are  responsible  for  the  methods  employed  by  Japan,  ir 
those  regions,  and  for  the  measures  taken. 

Of  great  significance  in  this  connection  is  a  statement 
of  Baron  Makino,  Minister  of  Agriculture  and  Com- 
merce :  *"  "  China  has  people,  and  population  is  what 
makes  trade.  No  other  country  in  the  world  offers  so 
vast  a  field  for  trade.  With  the  growth  of  education 
and  the  development  of  material  progress  possibilities 
of  commercial  enterprise  in  China  are  simply  unlimited. 
The  anxiety  of  the  powers  to  enter  into  more  and  more 
intimate  trade  and  political  relations  with  China  cannot 
but  excite  intense  interest  in  Japan:  for  China  is  our 
nearest  neighbor,  our  best  customer;  and  our  commer- 
cial and  political  relations  with  that  country  are  superior 
to  those  of  any  other  nation.  ...  It  is  true  that  Japan 
enjoys  a  profitable  trade  with  many  countries  of  the 
West:  .  .  but  this  occidental  trade  at  its  best  is  diffi- 
cult to  handle  with  any  satisfactory  degree  of  achieve- 
ment; for  it  is  always  more  difficult  to  deal  with  highly 
developed  commercial  nations  than  with  those  less  ad- 
*°  See  WTielpley,  op.  cit.,  page  247  flf. 


JAPAN 


165 


vanced  in  modern  progress.  Trade  with  peoples  of 
lower  social  standards  is  always  more  easy  and  profit- 
able. .  .  .  To-day  the  mind  of  Japan  is  all  toward  China 
as  the  commercial  hope  of  our  future,  not  to  say  any- 
thing of  our  geographical  and  racial  advantages  with 
that  country.  It  is  our  ambition  to  be  to  the  East  what 
Great  Britain  is  to  the  West.  ...  It  is  not  too  much  to 
say  that  a  great  part  of  our  hope  for  future  financial 
rehabilitation  in  Japan  depends  upon  how  we  can  fur- 
ther deveK  p  trade  with  China." 

It  is  now  our  purpose  to  investigate  measures  taken 
and  methods  used  by  the  Japanese  in  their  relations  with 
China  in  accordance  with  the  task  set  in  the  introduction. 
The  terms  of  the  Treaty  of  Portsmouth  in  1905  gave 
an  inadequate  result  to  Japan  for  all  her  costly  sacri- 
fices. Japan  had  tc  take  the  entire  financial  burden  on 
her  own  shoulders  not  being  able  to  force  Russia  to 
pay  her  an  indc  •:  ~5ut  on  the  other  hand,  Russia 

ceded  to  Japan  ..  .  .chold  rights  in  the  peninsula  of 
Liaotung  includi.^g  the  fortress  of  Port  Arthur  and  in 
Article  VI,  the  ownership  of  the  southern  section  of  the 
Manchurian  Railway,  from  Port  Arthur  to  Kwang- 
chengtze,  and  all  its  branches,  "  together  with  all  rights, 
privileges,  and  properties  appertaining  thereto  in  that 
region,  as  well  as  all  coal  mines  in  the  said  region,  be- 
longing to  or  worked  for  the  benefit  of  the  railway."  " 
"  "  British  and  Foreign  State  Papers,"  Vol.  98,  page  735. 


ir/.      FORKIGN  FINANCIAL  CONTROL  IN  CHINA 

In  Article  VII  "  Japan  and  Russia  en^^age  to  exploit  their 
resi)ective  railways  in  Manchuria  exclusively  for  com- 
mercial and  industrial  purposes  and  in  no  wise  for 
strategic  purposes." 

The  arrangement  was  subject  to  the  consent  of  the  Im- 
perial Chinese  Government,  which  was  promptly  forth- 
coming in  a  convention  of  Dec.  22,  1905, **  In  Article 
I  the  Imperial  Chinese  Government  consents  to  the 
transfers  and  assignment  made  by  Russia  to  Japan,  while 
in  Article  II  "  The  Imperial  Japanese  Government  en- 
gages that  in  regard  to  the  leased  territory  as  well  as 
in  the  matter  of  railway  construction  and  exploitation, 
they  will,  so  far  as  cir>.  jmstances  permit,  conform  to 
the  original  agreements  concluded  between  China  and 
Russia."  In  Article  VI,  "  The  Imperial  Chinese  Govern- 
ment agrees  that  Japan  has  the  right  to  maintain  and 
work  the  military  railway  line  constructed  between  An- 
tung  and  Mukden  and  to  improve  the  said  line  so  as  to 
make  it  fit  for  the  conveyance  of  commercial  and  indus- 
trial goods  of  all  nations." 

With  the  transfer  to  Japan  of  Russia's  railway  in- 
terests in  South  Manchuria,  the  policy  of  acquiring 
influence  by  economic  means  was  adopted  by  Japan  as 
the  last  of  the  Powers  and  was  practiced  with  great 
skill.  The  exploitation  of  South  Manchuria  was  not 
undertaken  by  the  Japanese  Government  directly  but 
*2 "  British  and  Foreign  State  Papers,"  Vol.  98,  page  740. 


i. 


JAPAN 


167 


i 


by  a  powerful  joint-stock  company  in  which  the 
Government  is  the  largest  shareholder.  On  June  i, 
1906.  the  South  Manchurian  Railway  Company  was 
promulgated  for  the  purpose  of  operating;  the  railway 
between  Dalny  and  Changchun,  including  branch  lines, 
the  line  between  Antung  and  Mukden,  and  the  rich  coal 
mines  of  Fushun  an  Yentai.'^ 

The  "  authorized  capital  "  of  the  concern  was  Yen 
200,000,000.  of  which  the  Government  held  Yen 
100.000.000.  Of  the  rest  only  Yen  20,000,000  were 
subscribed  by  and  issued  to  the  public."  The  Govern- 
ment shares  represent  the  value  of  the  lines  as  agreed 
upon  when  the  company  took  them  over,  together  with 
the  Yentai  and  Fushun  collieries.  The  railroad  is 
actually  run  by  the  proceeds  of  Li 2,000,000.  of  deben- 
tures issued  in  London  and  mostly  held  by  British  in- 
vestors These  debentures  are  guaranteed,  both  as  to 
capital  and  interest,  by  the  Japanese  Government.  The 
Japanese  Government  also  guaranteed  the  shareholders 
six  per  cent,  on  the  capital,  while  the  Company  pledged 
itself  to  repay  the  Government  as  soon  as  the  railway 
should  begin  to  yield  sufficient  revenue. 

The  South  Manchurian  Railway  Company  was   for- 
mally established  on  Nov.  13,  1906.  with  Baron  S.  Goto 

"For  the  status  of  the  South  Manchuri.  1  Railway,  see  Harrison, 
op.  cit.,  pages  258  flF.  See  also  "  Far  Eastern  Review,"  Vol.  11,  pages 
385  ff. 

'*  See  "  China  Year  Book,  1914,"  Chapter  on  Communications. 


l68      lORlilGN  MXANCIAL  COXTROI.  IN  CHINA 

as  President,  and  the  railways  and  mines  were  taken  over 
by  this  company  from  the  Japanese  Government  in  the 
spring  of   1907.     The  new  company  engages  largely  in 
enterprises  other  than  those  of  a  public  carrier.     The 
scope  of  the  new  undertaking  indeed  was  large:     The 
company  runs  a  regular  service  of  ships  between  Dairen 
and  Shanghai,  and  owns  the  fleet  of  the  Dairen  Steam- 
ship Connany.  coasting  in  the  Gulf  of   F'echili.     The 
Fushun  Colliery,  about  twenty-five  miles  cast  of  Muk- 
den, as  well  as  coal  fields  and  mines  at  various  other 
places,  are  under  its  control.     It  constructed  the  great 
harbor  works  at   Dairen   and   owns  the   wharves   and 
shipping  facilities  of  Port  Arthur.     It  provides  electric 
current  for  many  towns  and  gas  as  well,  where  required. 
It  has  large  hotels  at  all  these  places.     The  Japa.iese 
furthermore    encouraged    industries    and    brought    new 
ones.     They  have  settled  in  the  country  by  large  num- 
bers, and  to-day  it  is  estimated  that  there  are  100.000 
Japanese  in  South  Manchuria.     They,  last  not  least,  keep 
an  army  in  the  country,  the  so-called  "  railroad  guards  " 
For  in  a  supplementary  agreement  to  the  Portsmouth 
Treaty  "  The  High  Contracting  Parties  reserve  to  them- 
selves the  right  to  maintain  guards  to  protect  their  re- 
spective railway  lines  in  Manchuria.     The  number  of 
such  guards  shall  not  exceed  fifteen  per  kilometer,  and 
within  that  maximum  number  the  Commanders  of  the 
Japanese  and  Russian  armies  shall,  by  common  accord, 


JAPAN 


169 


fix  the  number  of  such  guards  to  he  employed,  as  small 
as  possible,  having  in  view  the  actual  requirements."  " 

I-'ull  advantage  of  this  clause  has  been  taken  by  both 
parties  and  in  the  absence  of  accurate  figures  the  length 
of  line  controlled  may  l)e  taken  as  the  measure  of  the 
local  military  strength.  The  700  miles  of  the  South  Mau- 
churian  Railway  system  together  vith  other  substantial 
concessions  aggregating  to  over  one  thousand  miles  en- 
able Japan  to  keep  a  formidable  army  in  the  country. 

Apart  from  the  system  itself,  the  Coii.pany  owns  from 
46,000  to  50.000  acres  of  land,  capable  of  very  profit- 
able cultivation,  the  so-called  '"  zones."  '"  About  these 
zones  Harrison  remarks:''  "On  receiving  from  the 
Russians  tlie  expropriated  lands  within  the  railway  zone, 
with  numerous  buildings,  the  Japanese  set  aside  a  cer- 
tain proportion  for  the  needs  of  the  railway,  and  trans- 
ferred the  remainder  to  the  settlement  administrations 
to  be  made  use  of."  According  to  Harrison  "  the 
settlement  chief,  or  socho.  superintends  the  lands  and 
buildings  of  his  division,  looks  after  scholastic,  m'^dical, 
and  sanitary  matters,  and  is  responsible  for  prope.  ./re- 
cautions  against  accidents  from  fire  or  other  cause.  He 
is  also  responsible  for  the  preparation  of  the  annual 
estimates  and  accounts  of  revenue  and  expenditure.     To 

1"  See  "  British  and  Foreign  State  Papers,"  Vol.  98,  page  739. 
1"  See  Lawton,  "Empires  of  the  Far  East,"  Vol.  II,  pages  1166  ff. 
>'  See  Harrison,  op.  cit.,  page  256.     See  whole  Chapter  XIV  of 
Harrison. 


I70      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

this  official  also  belong  the  imposition  of  taxes,  super- 
vision of  the  development  of  trade  and  industry  in  his 
division,  and  inspection  of  public  property.  .  .  .  All  the 
orders  and  arrangements  of  the  socho  must  be  submitted 
to  the  Chief  Director  of  the  railway,  by  whom  they  must 
be  sanctioned." 

In  addition  to  this  and  as  an  additional  precaution 
against  hasty  legislation  there  exist  special  committees 
in  severaPj^laces,  subordinate  to  the  Chief  of  the  settle- 
ment, "  but  nevertheless  at  liberty  to  complain  to  the 
Chief  Director  of  the  railway  against  what,  in  their 
opinion,  constitutes  illegal  action  on  the  part  of  the 
above  official."  "  The  subjects  of  every  nationality  are 
free  to  settle  in  the  railway  zone,  but  they  must  con- 
form to  all  the  rules  and  regulations  of  the  railway  com- 
pany, and  must  also  pay  a  specific  tax  for  public  pur- 
poses." In  the  zones  the  railway  builds  schools,  main- 
tains hospitals,  provides  for  medical  and  technical  col- 
lege training,  creates  townships,  erects  public  buildings, 
makes  roads,  constructs  telegraph  lines  and  installs  tele- 
phones. 

In  short,  this  great  and  most  efficient  concern  exer- 
cises not  only  commercial  privileges  but  also  administra- 
tive functions.  The  company  runs  the  whole  railway 
system,  including  all  lands  connected  with  it.  for  the 
Japanese  Government;  the  South  Manchurian  Railway 
Company  is  merely  another  name  for  the  Japanese  Gov- 


•»:5E'J^^''^i-?^ 


ff^T**^" 


JAPAN 


171 


emment.  The  Japanese  Government  owns  four-fifths 
of  the  paid-up  capital ;  the  bonds  are  guaranteed  by  the 
Government;  and  the  railway  is  under  supervision  of 
the  Japanese  Railway  Board,  which  controls  all  the 
nationalized  railways  of  Japan.*^  And  through  the 
"guards,"  the  company  works  hand  in  hand  with  the 
military  authorities.  While  Chinese  sovereignty  is 
respected  within  the  concession,  the  railway  with  all  its 
lands  constitutes  an  imperium  in  imperio.  Not  only  do 
the  Japanese  enjoy  immunity  from  taxation  by  the 
Chinese  authorities  but  the  preservation  of  law  and 
order  in  the  concession  is  intrusted  to  the  railway  com- 
pany, and  the  Japanese  Government  enjoys  a  correspond- 
ingly large  influence  within  the  whole  of  the  Japanese 
Sphere  of  Interest,  i.e.,  all  of  South  Manchuria. 

Japanese  control  in  South  Manchuria,  then,  as  based 
upon  the  railway  concession  inherited  from  Russia,  is 
much  similar  to  that  exercised  by  Russia  in  all  Man- 
churia previous  to  the  Russo-Japanese  War,  although 
the  South  Manchurian  Railway  Company  is  much  more 
of  a  commercial  enterprise  than  the  Chinese  Eastern  Rail- 
way. 

In  order  to  firmly  establish  Japanese  commerce  on 
a  definite  basis  Millard  informs  us  '"  that  "  the  Gov- 
ernment called  some  prominent  financiers  and  merchants 

'*  See  Harrison,  op.  cit.,  page  279. 
1*  See  Millard,  op  cit.,  page  206. 


172      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

into  consultation,  and  a  somewhat  extraordinary  pro- 
gram was  advanced.  For  purpose  of  directing,  under 
the  Government,  an  energetic  campaign  to  monopolize 
the  foreign  trade  of  Manchuria,  what  is  known  as  the 
Manchurian  Export  Guild  was  formed  in  1906.  It  in- 
cluded most  of  the  greater  commercial  guilds  in  Japan, 
such  as  the  Osaka  Boseki,  Mige  Boseki,  Kanakin  Seis- 
hoku,  Tenima  Ormono,  and  the  Okayama  Boseki.  It 
was  announced  that  Mitsui  and  Company  were  to  act  as 
general  agents  for  the  guilds  and  the  Government, 
through  its  branches  in  Manchuria;  and  the  Yokohama 
Specie  Bank,  the  Government's  fiscal  agent  in  Manchuria, 
was  to  lend  its  cooperation."  Foreign  traders  thus  were 
confronted  by  the  competition  of  the  Japanese  mer- 
chants, financiers  and  Government  combined.  A  great 
aid  to  Japan's  trade  was,  as  the  Far  Eastern  Rcznezv 
remarks,  "  the  economic  paternalism  of  the  Japanese 
Government,  which  takes  the  shape  of  subsidies  to 
steamship  lines  and  the  provision  of  cheap  capital  to 
merchants.  Assistance  is  also  freely  given  to  the  Japan- 
ese firms  by  the  Japanese  semi-official  bank  in  Man- 
churia." ^ 

In  the  matter  of  railways,  Japan  also  took  advantage 
of  the  post-bellum  situation  in  order  to  secure  substan- 
tial advantages  for  herself  or  at  least  to  obstruct  designs 
of  outsiders,   contrary  to  her  interests.     A  significant 
2"  See  "Far  Eastern  Review,"  Vol.  11,  page  488. 


JAPAN 


^7Z 


% 


and   interesting  case   is   offered   by   the   Hsinmintung- 
Fakumen  project.     In  November,  1907,  the  Chinese  Gov- 
ernment made  a  contract  with  the  British  firm  of  Paul- 
ing and  Co.  for  the  construction  of  an  extension  of  the 
Imperial  Railways  of  Northern  China  from  the  north- 
em  terminus   Hsinmintung  to   Fakumen,2»   fifty  miles 
in  length.     When  the  matter  became  known  at  Tokyo, 
Japan  objected  to  further  extension  of  this  line  on  the 
ground  that  it  would  injure  the  South  Manchurian  Rail- 
way.    The  Far  Eastern  Rczncw  remarks  to  this :     "  The 
Peking  Agreement  of  Dec.  22.   1905,  entered  into  be- 
tween China  and  Japan  contained  a  secret  clause  which 
bound  China  not  to  construct  prior  to  the  recovery  of 
the  South  Manchuriai    Railway  any  main  line  in  the 
neighborhood  of  and  parallel  to  that  railway  or  any 
branch  line  which  might  be  prejudicial  to  its  interests. 
This  self-denying  claim,  in  which  China  in  effect  sur- 
rendered her  sovereign  rights  to  construct  railways  in 
Manchuria,  was  made  public  and  successfully  invoked 
by  the  Japanese  Government  to  obstruct  and  cause  the 
abandonment   of   the  projected    Fakumen    Railroad,   a 
branch  line  of  the  Northern  Railways  from  Hsinmintung 
to  the  market  town  of  Fakumen.     China  had  entered 
into  a  signed  agreement  with  a  British  financial  corpora- 
tion to  supply  the  funds  and  contracted  with  a  British 
construction  firm  to  build  the  line.     China's  undoubted 
»»  See  "  Far  Eastern  Review,"  Vol.  11,  page  383. 


174      FOREIGN'  FINANCIAL  CONTROL  IN  CHINA 

intention  was  to  test  the  strength  of  the  secret  agree- 
ment referred  to,  and  if  Japan  acknowledged  her  right 
to  build  the  Fakumen  extensior.i,  the  line  was  to  be 
carried  on  northwards  towards  Changchun."  -^  The 
final  triumph  of  Japanese  diplomacy  found  its  expression 
in  Article  I  of  the  Sino-Japanese  Agreement  of  Sept. 
4,  1909.  referring  to  Manchuria:  "  The  Government  of 
China  engages  that  in  the  event  of  its  undertaking  to 
construct  a  railway  between  Hsimintun  and  Fakumen,  it 
shall  arrange  previously  with  the  Government  of 
Japan."  ^3 

The  British-American  project  from  Chinchow  to 
Aigun  met  with  a  similar  fate  owin^r  to  joint  Russo- 
Japanese  representations.  Other  objects  of  Japanese 
policy  were  the  Hsinmintung-Mukden  and  .  ^ntung  Muk- 
den railroads.-^  During  the  war  Japan  had  constructed 
a  narrow  gauge  railway  between  Hsinmintung  and  Muk- 
den. This  line  was  transferred  to  China  in  1908.  The 
Japanese,  however,  knew  how  to  retain  control  over  the 
line.  The  Antung  Mukden  railroad  likewise  was  con- 
structed during  the  war  by  the  Japanese  army  for  mili- 
tary purposes,  and  Japan  insisted  after  the  war,  that  she 
be  permitted  to  reconstruct  and  operate  the  line  as  a 
branch  of  the  South  Manchurian  Railway.  The  respec- 
tive clause  VI  in  the  Sino-Japanese  Peking  Treaty  reads 

22  "Far  Eastern  Review,"  Vol.  9,  page  15.3. 

2-'  See  "  British  and  Foreign  State  Papers,"  Vol.  102,  page  393. 

■•'♦  See  "  Far  Eastern  Review,"  Vol.  11,  page  z?^2,- 


JAPAN 


175 


n 


g 


'fi 


I 


as  follows :  "  The  Imperial  Chinese  Government  agrees 
that  Japan  has  the  right  to  maintain  and  work  the  mili- 
tary railway  line  -Dnstructed  between  Antung  and  Muk- 
den and  to  improve  that  said  line  so  as  to  make  it  fit  for 
the  conveyance  of  commercial  and  industrial  goods  of  ail 
nations."  " 

Final'y,  Japan  secured  the  Kirin-Changchun  Railway 
and  extensions  from  China.  Section  b,  Clause  3,  of  the 
Convention  between  Japan  and  China  signed  at  Peking 
April  15th,  1907,  provides  as  follows:  "If  the  Kirin- 
Changchun  line  should  hereafter  build  branch  lines  or 
an  extension  the  construction  of  such  lines  shall  rest 
of  right  with  the  Chinese  Government,  but  if  there  shall 
be  a  lack  of  capital,  application  should  be  made  to  the 
South  Manchurian  Railway  Company  for  an  arrange- 
ment." 28  The  branch  lines  as  well  as  a  participation  in 
the  construction  of  the  Changchun-Kirin  line  were  con- 
ceded to  Japan  in  the  above  mentioned  agreement  of 
Sept.,  1909. 

Referring  to  several  of  the  later  railway  concessions 
the  Far  Eastern  Review  remarks :  "  By  securing  from 
China  the  control  and  administration  of  the  Kirin- 
Changchun  Railway,  and  extension  of  the  agreements 
governing  the  South  Manchurian  and  Antung-Mukden 
railways,  as  well  as  the  refusal  of  foreign  loans  for 

«!!'  "d"'*.''!?  ^"^  ^°''^'^"  ^^^^'^  Papers."  Vol.  98.  page  740. 
See     British  and  Foreign  State  Papers,"  Vol.  loi,  page  275. 


I7f>      FOREIGN'  FIXAXCIAL  CONTROL  IN  CHINA 

railway  purposes  in  South  Manchuria,  Japan  has  thej 
satisfaction  of  knowing  that  she  is  now  dominant  in  the 
country  so  far  as  railways  are  concerned  even  if  she  is 
eventually  unable  to  extract  from  China  the  consent 
necessary  to  establish  her  overtly  in  a  supremely  favored 
position  politically."  " 

All  the  railways  in  Southern  Manchuria,  constructed 
or  projected,  belong  to  the  one  great  Japanese  state-con- 
trolled system,  and  have  connection  with  the  Korean 
military  system.  They  consequently  will,  aside  from 
commercial  advantages,  afford  Japan  further  facilities 
for  the  movement  of  troops  in  case  of  necessity.  This 
is  the  opinion  of  Harrison,  who  writes :  "  It  can 
scarcely  be  doubted  that,  in  the  event  of  hostilities  with 
Russia  or  China.  Japan  would  not  be  long  about  avail- 
ing herself  of  the  Chinese  railroads,  which  would  render 
her  position  even  stronger."  ^s 

In  this  connection  it  has  to  be  remembered  that  South 
Manchuria  stands  simultaneously  with  the  supervision  of 
the  raib.vay  company  under  the  military  regime  of 
Japan,  based  upon  an  addition  to  Article  III  of  the  Treaty 
of  Portsmouth  which  grants  the  righ:  to  Japan  to  main- 
tain "  guards  "  to  protect  the  railway  lines  in  Man- 
churia. 

^'  See  "  Far  Eastern  Review,"  Vol.  ii,  page  375. 
-*  See  Harrison,  op.  cit.,  page  292. 


''^mmY.WW^-^' 


JAPAN 


177 


For  the  first  two  year?  after  the  war,  the  military 
grip  of  Japan  upon  Manchuria  was  a  tight  one  and  not 
without  legal  basis.  Japan  and  Russia  -n  Article  III 
of  the  Portsmouth  treaty  mutually  engaged :  ^^ 

1.  "To  evacuate  completely  and  simultaneously  Man- 
churia except  the  territory  aflfected  by  the  lease  of  the 
Liaotung  Peninsula,  in  conformity  with  the  provisions 
of  additional  Article  I  annexed  to  this  treaty  " ;  and 

2.  "  To  restore  entirely  and  completely  to  the  ex- 
clusive administration  of  China  all  portions  of  Man- 
churia now  in  the  occupation  or  under  the  control  of 
the  Japanese  or  Russian  troops  with  the  exception  of 
the  territory  above  mentioned." 

The  war  then  was  followed  by  a  "  legal  "  evacuation 
period  during  which  Manchuria  was  under  Russian  and 
Japanese  military  control.  The  end  of  the  so-called 
evacuation  period  however,  was  set  as  late  as  March, 
1907,  thus  giving  Japan  and  Russia  the  right  to  a  two 
years'  military  administration  of  the  country.  It  was 
mainly  during  this  period  that  many  accusations  by 
Western  journalists  were  heard,  pointing  to  breaches  of 
the  doctrines  of  the  "  open  door,"  "  equal  opportunity  " 
and  "  integrity  of  China  "  on  the  part  of  Japan.  But 
inasmuch  as  it  is  the  purpose  of  this  treatise  to  investi- 
gate and  analyze  well-founded  facts,  we  cannot  pay  any 
2»  See  "  British  and  Foreign  State  Papers."  Vol.  98,  page  735. 


m 


1/8 


FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 


attention  to  alleged  breaches  of  obligations.  Besides 
Japan  has  at  several  occasions  acknowledged  and  bounc 
herself  to  adherence  to  the  principles  in  question. 

First  of  all  Japan  had  answered   favorably  to  Mr 
Hay's  ••  Open  Door  Policy  "  circular  sent  to  'the  Great 
Powers  in  1899.-     On  January  30,   1902.  the  Anglo- 
Japanese   Offensive   and    Defensive   Alliance   was   con- 
cluded.3i  which  clearly  sets  forth  that  the  two  govern- 
ments are  specially  interested  in  maintaining  the  "  inde- 
pendence and  territorial  integrity  of  the  Empire  of  China 
and  the  Empire  of  Korea,  which  pledge  has  been  broken 
since  by  Japan,  and  in  securing  equal  opportunity  in 
those  coun.-ies  for  the  commerce  and  industry  of  alii 
nations." 

The  same  words  recur  in  the  agreement  between 
Japan  and  Great  Britain  of  August  12,  1905.  made  public 
September  27,  1905 -being  a  renewal  of  the  alliance  I 
-which  m  its  preamble  gives  the  preservation  of  the 
integrity  of  China  and  maintenance  of  equal  opportunity 
for  all  as  one  of  its  principal  objects.-^^  ^he  alliance 
was  reaffirmed  in  191 1. 

In  Article  IV  of  the  Portsmouth  Treaty  "  Japan  and 
Riisia  reciprocally  engage  not  to  obstruct  any  general 
measures  common  to  all  countries  which  China  may  take 

bee  Rockhill,  op.  cit.,  No.  16 
"  "  British  and  Foreign  State  Papers."  Vol.  98.  page  136. 


JAPAN 


179 


for  the  development  of  the  commerce  and  industry  of 
Manchuria."  '* 

In  1907  two  understandings  were  arrived  at  by  Japan 
as  one  party,  reaffirming  the  adherence  to  the  principles 
in  question.  Namely:  On  June  10,  1907,  an  agreer.^°nt 
was  concluded  between  Japan  and  France,  in  which  ihe 
following  words  occur  "  The  Governments  of  Japan 
and  France,  being  agreed  to  respect  the  independence 
and  integrity  of  China,  as  well  as  the  principle  of  equal 
treatment  in  that  country  for  the  commerce  and  sub- 
jects or  citizens  of  all  nations,"  etc.^* 

And  on  July  30th  of  the  same  year,  a  convention 
between  Japan  and  Russia  took  place  in  which  the  two 
parties  "  recognize  the  independence  and  territorial  integ- 
rity of  the  Empire  of  China,  and  the  principle  of  equal 
opportunity  in  whatever  concerns  the  commerce  and  in- 
dustry of  all  nations  in  that  Empire."  •» 

On  November  30,  1908,  a  more  explicit  understanding 
than  that  of  1899  was  reached  between  Japan  and  the 
United  States.  At  that  date  notes  were  exchanged 
between  the  two  countries,  declaring  their  policy  in  the 
Far  East  as  follows :  ^^ 

Article  II:  The  policy  of  both  Governments  unin- 
fluenced by  any  aggressive  tendencies,  is  directed  to  the 

"  "  British  and  Foreign  State  Papers,"  Vol.  98,  page  735. 
"  See  "  British  and  Foreign  State  Papers,"  Vol.  100,  page  913 
«»  See  "  British  and  Foreign  State  Papers,"  Vol.  loi,  page  462. 
»•  See  American  Journal  of  Inttrnational  Law,  January,  igog. 


l8o      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

maintenance  of  the  existing  status  quo  in  the  regior 
mentioned  (Pacific  Ocean)  and  to  the  defense  of  the 
principle  of  equal  opportunity  for  commerce  and  industry 
in  China. 

Article  IV :  They  are  also  determined  to  preserve  the 
common  interests  of  all  powers  in  China  by  supporting 
by  all  pacific  means  at  their  disposal  the  independence 
and  integrity  of  China  and  the  principle  of  equal  oppor- 
tunity for  the  commerce  and  industry  of  all  nations  in 
that  Empire. 

And  finally  two  years  later  Japan  and  Russia,  in  the 
convention  of  July  4th,  1910,  in  relation  to  Manchuria 
declared  in  Article  II :  "  "  Each  of  the  High  Contract- 
ing Parties  undertakes  to  maintain  and  respect  the 
status  quo  in  Manchuria  resulting  from  all  the  treaties, 
conventions,  and  other  arrangements  concluded  up  to 
this  date  either  between  Russia  and  Japan  or  between 
those  two  powers  and  Chi.ia." 

The  diflferent  conventions,  agreementf  and  so  forth, 
clearly  prove  that  Japan  is  committed  as  deeply  as  other 
powers  are.  to  the  policy  of  the  "  open  door,"  "  equal 
opportunity  "  and  '  integrity  of  China." 

It  has  always  been  Japan's  emphatic  contention  that 

so  far  no  measure  she  has  taken  is  inconsistent  with 

the  aoctrines  to  which  she  has  pledged  herself.     Indeed 

strict  adherence  to  the  principles  of  international  law 

3'  Sec     British  and  Foreign  State  Papers,"  Vol.  103,  page  586. 


JAPAN 


i8l 


^ 


has  according  to  Count  Okuma  always  been  considered 
the  wisest  diplomacy.  Count  Oknma  says:  "I  desire 
here  to  emphasi? :  the  fact  that  foreign  intercourse 
must  alx)ve  all  things  be  planned  on  a  large  scale,  for 
all  diplomatic  projects  have  immediate  interest  for  the 
whole  world;  and  that,  since  foreign  policy,  or  rather, 
national  policy,  must  be  fixed,  unchanged,  and  contin- 
uous, the  best  method  of  diplomacy  is  to  adhere  strictly 
to  all  principles  of  international  law."  ^^ 

In  further  defense  of  Japan  against  any  accusations 
we  have  to  consider  that  Japan  could  not  afford  to  be 
altogether  altruistic  in  her  methods  as  long  as  Russia's 
policy  in  the  north  remained  a  menace  to  Japan.  Con- 
cerning Japan's  justification  of  her  actions  in  Manchuria 
by  reference  to  Russian  precedent  we  only  need  to  refer 
to  our  chapter  on  Russia.  There  we  find  that  the  Man- 
churian  Railway,  which  according  to  Article  VI  of  the 
Portsmouth  Treaty  was  transferred  to  Japan  "  together 
with  all  rights,  privileges  and  properties  appertaining 
thereto  "  and  which  according  to  Article  VII  was  in 
no  wise  to  be  exploited  for  strategic  purposes,  had  enabled 
Russia  to  dominate  the  whole  of  Manchuria  and  at  once 
had  given  her  a  predominance  in  North  China  which 
placed  other  Powers  at  a  marked  disadvantage.  Russia's 
railways  in  that  region  were  specific  means  for  encroach- 
es See  A.  Stead,  "  Japan  by  the  Japanese,"  chapter  Foreign  Policy 
by  Count  Okuma,  page  221. 


1 82 


FORKIGX  FINANCIAL  CONTROL  IN  CHINA 


ment  upon  China,  that  is.  for  Russian  imperialistic  ex 
pans.on.  The  Russification  of  the  country  had  pro 
ceeded  at  a  fast  pace  and  other  Powers  -  as  for  instanc, 
Great  Britain  -  were  effectively  excluded  from  railwaj 
participation.  So  also  was  China,  and.  although  accord- 
ing to  the  original  agreement  the  Chinese  Eastern  Rail- 
way was  to  be  under  Chinese  direction,  only  Russians 
managed  the  lines. 

Is  it  not  surprising,  then,  that  Japan,  when  she  fol- 
lowed Russia  in  the  possession  of  the  railroads  and  in 
the  control  of  the  country,  was  determined  to  reap  the 
fruits  of  her  hard  won  victories  without  restriction  and 
that  Japan,   however  altruistic  her  professions  might 
have  been,  would  not  readily  subordinate  her  own  in- 
terests to  those  of  China  or  other  foreign  powers.     For 
on  behalf  of  Japan  it  has  been  urged  that  any  special 
advantages  she  has  secured  in  Manchuria  are  merely  in 
the  nature  of  reward  for  her  vast  expenditure  in  blood 
and  treasure,  and  that,  moreover,  the  control  over  Man- 
churia and  other  parts  of  Eastern  Asia  that  might  fol- 
low —  together  with  the  exploitation  of  those  regions  — 
is   a   matter   of   life   and   death    for   her   welfare   and 
national  existence,  especially  in  the  face  of  international 
economic  competition. 

In  this  connection  it  is  not  only  curious  but  also  very 
significant  to  observe  that  Russia  in  the  North  followed 
-or  at  least  pretended  to  follow  -  Japan's  policy  in 


[. 


■■*MP'-.'JS«^.:->*i..,'r, 


JAPAN  183 

the  South.  Behind  the  attitude  of  both  was  the  ever 
present  envy  and  mistrust  of  the  other.  Both  have  been 
enemies  and  might  have  continued  to  be  had  it  not  been 
for  the  Russian  revolution.  Therefore  we  have  been 
given  books  bearing  titles  such  as  the  "  Coming  Struggle 
in  Eastern  Asia  ' 

The  impartial  observer,  then,  must  not  permit  himself 
to  be  deceived  by  the  apparent  amity  between  the  two 
Powers  which  was  established  in  1907. 

The  Russo-Japanese  business  agreement?  in  relation  to 
Manchuria  concluded  on  July  30th.  1907,  and  on  July 
4th,   1910— tjeing  of  the  most  friendly  nature  —  lead 
to  the  assumption  that  Japan  and  Russia  had  made  up 
their  minds  for  matter  of  convenience  —  and   for  the 
time  being  — to  divide  their  interests  in  Manchuria  be- 
tween them,  to  strengthen  their  positions  in  their  respec- 
tive "  spheres  "  and  to  guarantee  to  each  other  the  status 
quo    against    any    possible    intruder:    for    such    had 
supposedly  appeared  in  the  person  of  Mr.  Knox,  who 
had   urged  internationalisation   of   certain   railways   in 
Manchuria  and  construction  of  new  lines  under  inter- 
national auspices.^''    The  efforts  of  the  American  state 
department  only  hastened  the  conclusion  of  the  second 
agreement  \\':iich  took  place  on  the  Fourth  of  July. 
We  quote  the  text  in  full :  *° 

">See  Chapters  VII  and  VIII. 

"  See  •'  British  Foreign  and  State  Papers,"  Vol.  103,  page  s86. 


1 84      FOREIGX  FINANCIAL  CONTROL  IN  CHINA 

1.  With  the  object  of  facilitating  communications  and 
developing  the  commerce  of  the  nations,  the  two  high 
contracting  parties  agree  to  extend  to  one  another  their 
friendly  cooperation  with  a  view  to  the  improvement  of 
their  respective  railway  lines  in  Manchuria,  and  the  per- 
fecting of  the  connecting  services  of  the  said  lines,  and 
to  abstain  from  all  competition  prejudicial  to  the  realiza- 
tion of  this  object. 

2.  Each  of  the  high  contracting  parties  undertakes  to 
maintain  and  respect  the  status  quo  in  Manchuria  result- 
ing from  all  the  treaties,  conventions,  and  other  arrange- 
ments concluded  up  to  this  date,  either  between  Russia 
and  Japan  or  between  those  two  Powers  and  China. 
Copies  of  the  said  arrangements  have  been  exchanged 
between  Rnssia  and  Japan. 

3.  In  the  event  of  anything  arising  of  a  nature  to 
threaten  the  status  quo  mentioned  above,  the  two  high 
contracting  p-rties  shall  enter  each  time  into  communi- 
cation with  each  other  with  a  view  to  coming  to  an  under- 
standing as  to  the  measures  they  may  think  it  necessary 
to  take  for  the  maintenance  of  the  said  status  quo. 

The  agreement  having  been  l^appily  concluded,  Japan 
endeavored  to  take  full  advantage  of  the  special  position 
.she  held  in  South  Manchuria.  William  Blane,  in  an 
article,   "The  Japanese  in   China."  *»   writes   in    1915: 

♦'  See  Journal  of  the  American  Asiatic  Association  of  July   1915 
page  irS- 


JAPAN 


185 


"  When  I  went  over  the  works  of  the  South  Manchurian 
Railway  Company  two  years  ago  I  was  struck  by  the 
permanent  nature  of  everything  that  had  been  done  and 
that  was  in  progress  .  .  .  extensive  additions  and  costly 
improvements  were  in  progress  at  the  great  harbor  of 
Dairen,  and  the  main  line  track  was  being  doubled 
throughout.  The  Company  was  making  huge  profits 
and  sinking  the  greater  part  of  them  in  constructional 
works  which  will  serve  for  a  century  after  the  present 
agreements  expire.  The  Engineer  of  the  13th  of 
November,  1914,  after  describing  the  railways  and 
drawing  attention  to  the  brief  tenure  of  the  company 
adds :  In  the  face  of  these  things  Japan,  instead  of  pre- 
paring to  reap  returns,  keeps  putting  more  money  into 
the  business  every  year." 

This  Russo-Japanese  agreement  of  19 10  then  was  the 
crowning  achievement  of  Japan's  Manchurian  policy. 
What  are  the  principal  reasons  for  Japan's  success  ?  In 
the  pursuance  of  her  foreign  policy  it  was  primarily 
the  monarchical-military  and  at  the  same  time  somewhat 
oligarchical-paternalistic  form  of  her  government  — 
partly  traditional,  partly  copied  from  Germany  —  which 
being  well  adapted  to  the  special  means  of  Japan  has 
made  her  so  successful.  That  diplomacy  has  to  rest  with 
the  crown  and  the  crown's  advisers,  and  that  the  goal, 
once  set  must  not  be  changed,  has  been  early  recognized 
by   Japanese   statesmen.     Says   Count    Okuma :     "  The 


1 86 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


kind  of  diplomacy  that  changes  with  its  director  is  mos 
pernicious  and  dangerous."  ^-^     And  Douglas,  comment 
mg  upon  the  Proclamation  of  the  Japanese  Constitution 
says :     "  Foreseeing  that,  in  order  to  maintain  nationa 
independence  and  to  fulfill  what  ^hey  regard  as  theii 
mission  in  the  East,  unity  of  control  and  the  unfettered 
power  of  employing  all  the  forces  of  the  nation  wo.ld  be 
indispensable  conditions  of  success,  they  resolved,  while 
enlisting  the  sympathies  of  the  people,  to  secure  the  crown 
against  excessive  popular  interference."  "     Among  other 
means  by  which  Japan  has  attained  her  predominant  po- 
sition in  Asia  is  to  be  placed  first  in  historic  importance 
the  alliance  of  Japan  with  Great  Britain.     The  immedi- 
ate  practical  benefit  of  the  alliance  to  Japan,  renewed 
during  the  Russo-Japanese  War  and  again  in  July,  191 1, 
was  the  readier  sale  of  Japanese  bonds.     The  surplus 
from    war    funds    borrowed    in   England    enabled    the 
Japanese  Government  to  invest  in  the  South  Manchurian 
Railway.     Debentures  floated  in  England  have  resulted 
in  the  expansion  of  that  great  corporation  at  the  expense 
of  others,  last  not  least,  of  Great  Britain  herself.     While 
Britain.  France.  Belgium,  Germany,  and  even  Russia  to 
some   extent   have  financed   their   railways   themselves, 
Japan  alone  has  constructed  and  equipped  her  railways  on 
_^«See  Count  Okuma  in  A.  Stead.  "Japan  by  the  Japanese."  page 
♦«  See  Douglas,  op.  cit.,  page  201. 


JAPAN 


187 


the  mainland  of  Asia  almost  exclusively  with  foreign 
capital,  and  that  capital  —  thanks  to  the  alliance  —  is 
British, 

But  above  all,  the  alliance  permitted  Japan's  entry 
into  the  present  World  War.  When  Japan  took  pos- 
session of  the  territory  originally  leased  to  Germany, 
she  did  so  as  the  representative  of  Great  Britain  and  her 
European  Allies.  At  that  time  Count  Okuma  claimed 
that:**  "Every  sense  of  loyalty  and  honor  obliges 
Japan  to  cooperate  with  Great  Britain  to  clear  from 
these  waters  the  enemies  who  in  the  past,  the  present 
and  the  future  menace  her  interests,  her  trade,  her 
shipping,  and  her  people's  lives."  And  the  Japanese 
Foreign  Office  addresses  the  United  States  as  follows :  *' 
"  Aside  from  the  history  of  the  seizure  of  the  place  by 
Germany  and  her  conduct  dating  back  to  and  including 
her  intervention,  in  conjunction  with  Russia  and  France 
after  the  Chino- Japanese  War,  it  is  absolutely  necessary 
to  eliminate  such  possession  completely  if  Japan  is  to 
restore  immediately  complete  peace  in  the  Far  East  in 
accordance  with  the  terms  of  the  Anglo-Japanese  alli- 
ance." 

Japan's  interference,  then,  is  based  upon  Article  A,  of 
the  Preamble  in  conjunction  with  Article  I,  of  the  treaty 

**  Journal  of  the  American  Asiatic  Association.  Vol.  XIV,  No.  8, 
page  231. 
"  Ibidem. 


1 88 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


of  July  13,  191  r,  the  Preamble  stating  as  object  of  the 
treaty.^e  "the  consolidation  and  maintenance  of  the 
general  peace  in  the  regions  of  Eastern  Asia  and  India." 
The  seizure  of  Kiaochau  was  connected  with  various 
substantial  advantages  to  Japan: 

Japan  occupied  the  Kiaochau-Tsinanfu  Railway.  ThiJ 
seizure  apparently  meant  a  viclaton  of  Chinese  terri- 
tory  and  the  Chinese  protested  against  it  as  falling  en- 
tirely out  of  the  German  territory  which  has  l^een  leased. 
But  from  the  Japanese  standpoint  it  would  be  dangerous 
to  leave  the  railway  in  the  hands  of  the  enemies. 

Furthermore,  the  Japanese  secured  from  China  sub- 
stantial and  exclusive  concessions  in  .Shantung.  To  that 
end  the  two  countries  concluded  a  treaty  respecting  the 
Province  of  Shantung  and  exchanged  notes  respecting 
the  restoration  of  the  leased  territory  of  Kiaochau  Bay 
-both  on  the  25th  day  of  the  5th  month  of  the  4th  | 
year  of  Taisho."*" 

We  quote  the  important  passage^  of  the  treaty,  etc.. 
Article  I :  The  Chinese  Government  agrees  to  give  full 
assent  to  all  matters  upon  which  the  Japanese  Govern- 
ment may  hereafter  agree  with  the  German  Government 
relatmg  to  the  disposition  of  all  rights,  interests  and  con- 
cessions which  Germany,  by  virtue  of  treaties  or  other- 

4r?r.7?'?  u"^  ^°"'^"  ^^^^^  P^P^"."  Vol.  104.  page  I7t 


f^m 


T>?7^ 


JAPAN 


189 


wise,   possesses  in  relation   to  the   Province  of   Shan- 
tung. 

Article  II:  The  Chinese  Government  agrees  that  as 
regards  the  railway  to  be  built  by  China  herself  from 
Chefoo  or  Lungkow  to  connect  with  the  Kiaochau- 
Tsinanfu  railway,  if  Germany  abandons  the  privilege 
of  financing  the  Chefoo-Weihsien  line,  China  will 
approach  Japanese  capitalists  to  negotiate  for  a  loan. 

And  as  to  Kiaochau :  "  When  after  the  termination 
of  the  present  war,  the  leased  territory  of  Kiaochau  bay 
is  completel  left  to  the  free  disposal  of  Japan,  the 
Japanese  Government  will  restore  the  said  territory  to 
China  under  the  following  conditions: 

"  I.  The  whole  of  Kiaochau  bay  to  be  opened  as  a  com- 
mercial Port. 

"  2.  A  concession  under  the  exclusive  jurisdiction  of 
Japan  to  be  established  at  a  place  designated  by  the 
Japanese  Government." 

Finally,  on  the  same  day  Japan  and  China  concluded 
a  treaty  and  exchanged  various  notes  lespecting  South 
Manchuria  and  Eastern  Inner  Mongolia.  The  respec- 
tive agreements  of  this  date  may  be  summed  up  as  fol- 
lows:"" The  lease  of  Port  Arthur  and  Dalny  and  the 
terms  of  the  South  Manchuria  Railway  and  the  Antung- 
Mukden  Railway  shall  be  extended  to  99  years. 

"See  American  Journal  of  International  Law,  Vol.    10,   No.    i, 
Supplement  pages  5  flF. 


I90      FOREIGN  FIXAXTIAL  CONTROL  IN  CHINA 

Japanese  subjects  in  South  Manchuria  an^l  Eastern 
Inner  Mongolia  receive  furthei  privileges  as  to  trad- 
ing, traveling  and  leasing  properties. 

China  will  open  suitable  places  in  these  regions  as 
commercial  ports. 

Railroad  agreements  between  Japan  and  China  may 
be  revised  as  soon  as  more  advantageous  terms  than 
those  existing  are  granted  to  other  foreigners. 

Japanese  subjects  shall  investigate  and  select  mines  in 
specified  areas  within  said  regions. 

Loans  for  building  railways  in  said  regions  may  be 
negotiated  with  Japanese  capitalists  in  preference  to 
other  foreigners.  1 

If  foreign  advisers  or  instructors  on  political,  finan- 
cial, military  or  police  matters  are  to  be  employed  in 
South  Manchuria,  Japanese  may  be  employed  first. 

Finally,  China  and  Japan  agreed  upon  cooperation! 
in  the  working  of  the  Hanyehping  Company,  China  not 
being  permitted  to  convert  it  into  a  state  enterprise  nor 
to  cause  it  to  borrow  and  use  foreign  capital  other  than! 
Japanese.  J 

These  agreements  require  but  little  commentary. 
They  strengthen  Japan's  position  in  Southern  Manchuria! 
through  the  extension  of  all  leases  to  99  years  andj 
through  the  provision  of  foreign  advisers,  if  such  are 
to  be  employed,  they  give  to  Japan  more  exclusive  con- 
cessions   and    privileges    in    Shantung,    Eastern    Inner 


mx- 


JAPAN  191 

Mongolia  and  Southern  Manchuria ;  and  they  give  pref- 
erence to  Japanese  financiers  in  the  building  of  new  rail- 
roads in  said  regions. 

There  are  three  points  we  now  mean  to  emphasize: 
Firstly,  the  United  States-Japan  agreement  of  November 
2,  1917,  has  dispersed  much  of  the  doubt  and  suspicions 
about  Japan's  ulterior  aims  in  China  which  had  been 
voiced  so  freely  throughout  the  world.*"*     Referring  to 
Japan's  special  interests  in  China  the  agreement  says: 
"  The  United  States  has  every  confidence  in  the  repeated 
assurances  of  the  Imperial  Japanese  Government  that, 
while  geographical  position  gives  Japan  much  special 
interests,  they  have  no  desire  to  discriminate  against  the 
trade  of  other  nations  or  to  disregard  the  commercial 
rights  heretofore  granted  by  China  in  treaties  with  other 
powers."     The  agreement  also  denies  that  the  two  gov- 
ernments "have  any  purpose  to  infringe  in  any  way 
the    independence    or    territorial    integrity    of    China." 
Secondly,  Japan's  control  over  her  new  spheres  will  again 
primarily  be  exercised  through  railways ;  in  other  words, 
it  will  be  financial.     Thirdly,  Japan  is  extending  her 
control  in  China  while  the  control  of  other  nations  is 
declining. 

Japan  has  taken  over  the  protection  of  British  interests 
in  Eastern  Asia.     She  has  eliminated  Germany.     She 
has  concluded  a  treaty  with  Russia,  which  came  near 
"  See  especially  F.  McCormick.  "  The  Menace  of  Japan." 


192      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

to  being  an  alliance.     The  text  of  this  treaty,  conclud 
on  July  3rd,  191C,  reads  as  follows: "" 

"  The  Imperial  Governments  of  Japan  and  Russ 
having  resolved  by  united  efforts  to  maintain  permane 
peace  in  the  Far  East,  have  agreed  upon  the  followir 

"  Article  I :  Japan  will  not  become  party  to  ai 
arrangement  or  political  combination  directed  again 
Russia.  Russia  will  not  become  party  to  any  arrang 
ment  or  political   combination  directed   against  Japa 

"  Article  II :  In  case  the  territorial  rights  or  speci 
interests  in  the  Far  East  of  one  of  the  contracting  parti 
recognized  by  the  other  contracting  party  are  menace 
Japan  and  Russia  will  act  in  concert  on  the  measur 
to  be  taken  in  view  of  the  support  or  cooperation  nece 
sary  for  the  protection  and  defense  of  these  rights  ar 
interests." 

Mr.  Kawakami  makes  the  following  comment  upc 
this  treaty :  "  To  call  the  new  convention  an  alliam 
is,  perhaps,  not  quite  correct.  A  treaty  of  alliance  mu 
provide  mutual  obligations  on  the  part  of  the  high  coi 
tracting  parties  to  render  armed  assistance  to  eich  othc 
in  case  their  respective  interests  are  in  danger.  TI 
most  significant  part  of  the  convention  lies  in  the  wic 
application  which  it  apparently  permits.  While  it 
obvious  that  the  covenant  aims  chiefly  to  secure  tl 
respective  interests  of  the  contracting  parties  in  Mai 

^^See  American  Journal  of  International  Laiv,  S  ippl.  X,  239. 


JAPAN 


193 


churia  and  Mongolia,  its  scope  is  not  restricted  to  these 
two  countries  but  covers  the  entire  Far  East."  "" 

An  additional  agreement  between  Russia  and  Japan 
throws  considerable  light  upon  the  real  value  of  the 
convention  to  Japan."  The  Chinese  Eastern  Railway 
has  been  sold  by  Russia  to  Japan  from  Changchun  to  Lao- 
shaokou  for  six  million  yen.  The  length  is  71  miles. 
Russia  furthermore  has  extended  to  Japan  the  privilege  of 
navigating  the  Second  Sungari  River.  In  other  words 
Japan's  interests  in  Manchuria  are  expanding.  Russia 
was  under  considerable  obligation  to  Japan  for  war 
supplies,  and  otherwise;  the  convention  was  the  quid 
pro  quo. 

Last  not  least  has  Japan  welcomed  the  decision  of  the 
United  States  to  enter  the  war.  She  has  gladly  ofFered 
the  protection  of  American  interests  on  the  whole  Pacific 
and  a  close  cooperation  with  the  United  States  in  the 
pursuance  of  the  war.  In  return  for  these  services  she 
has  now  received  an  acknowledgment  of  her  "special 
interests  "  in  China  by  the  government  of  the  United 
States.  Aside  from  the  declarations  of  adherence  to 
the  "open  door"  and  "independence  and  territorial 
integrity  of  China  "  principles,  the  agreement  of  Novem- 
ber 2,  19 1/,  contains  the  following  most  important  pas- 
sage:    "The   governments   of   the   United    States  and 

"  f  ^*  ^-  ^•.  Kawakami,  Review  of  Reviews,  Sept,  1916. 
-See  Kawakami,  ibidem,  and  "Far  Eastern  Review,"  Aug.,  1916. 


?!(»•      ^*mS'  TW  ■ 


■A  «  ••l'»e  SrTfc  !,'■  'Amr.*t.''Tr" 


194      FOREIGN  FIN'ANCIAL  CONTROL  IN  CHINA 

Japan    recognize    that    territorial    propinquity    create 
special  relations  between  countries,  and,  consequently,  th 
government  of  the  United  States  recognizes  that  Japai 
has  special  interests  in  China,  particularly  in  the  par 
to  which  her  possessions  are  contiguous,"     This  agree 
ment  is  doubtless  one  of  the  greatest  achievements  o 
Japanese  diplomacy.     It  removes  all  danger  of  frictior 
between  the  United  States  and  Japan ;  it  secures  the  in 
dependence  and  territorial  integrity  of  China  and  th( 
"  open  door  "  and  equal  opportunity  for  commerce  anc: 
industry  in  China;  it  opposes  "the  acquisition  by  an> 
government  of  any  special  rights  or  privileges  that  would 
affect  the  independence  or  territorial  integrity  of  China 
or  that  would  deny  to  the  subjects  or  citizens  of  any 
country  the  free  enjoyment  of  equal  opportunity  in  the 
commerce  and  industry  of  China  " ;  and  last,  not  least,  it 
recognizes  Japan's  predominant  position  in  Eastern  Asia. 
Thus  is  Western  control  in  China  gradually  declining 
while  Japanese  control  is  in  the  ascendancy.     All  treaties, 
conventions,   agreements,   and  alliances   through   which 
Japan  is  consolidating  her  position  are  concluded  for 
the  consolidation  and  maintenance  of  a  permanent  peace 
in  Eastern  Asia.     This  is  by  no  means  merely  a  phrase. 
It  is  the  crux,  the  key,  to  the  whole  Far  Eastern  Ques- 
tion :     A  Permanent  Peace,  but  a  Japanese  Peace,  a  Pax 
Japonica.     Such  is  th  ^  secret,  then,  of  Japan's  control  in 
China :  an  Eastern  Asiatic  Doctrine  with  Japanese  Hege- 


W 


JAPAN 


195 


mony  — Japan  to  be  Sovereign  Arbitt.  «»nd  High  Pro- 
tector of  Eastern  Asia.     To  quote  the  words  of  Aubert : 
"  Paix  Japonaise  de  I'Extreme-Orient,  comme  jadis  11 
y  eut  une  Pax  Romana  dans  le  monde  mediterraneen, 
comme  aujourd'hui  il  y  a  une  paix  Britannique  aux 
Indes,  une  paix  Amtricaine  dans  les  deux  Ameriques, 
c'est-a-dire  la  paix  dans  une  partie  du  monde  imposee 
par  un  peuple  fort  qui  ne  tolere  point  de  querelles  privees 
ou  d'agression  etrangere  sur  le  territoire  qu'il  protege. 
Arbiter  souverain  entre  les  peuples  Extreme-Orientaux 
et  leur  defenseur  contre  toute  attaque  des  puissances 
occidentales.  tel  pent  apparaitre  le  Japon."  »3 

"  Aubert,  "  Paix  Japonaise,"  page  37. 


« 


CHAPTER  VII 


UNITED   STATES 


The  United  States  is  the  only  great  nation  that  ha 
maintained  throughout  its  relations  with  China  a  con 
sistent  attitude  of  unselfishness  and  of  a  decent  consid 
eration  and  respect  for  the  sovereign  rights  of  th 
Chinese  people.  Xot  only  has  the  United  States  dom 
this  in  her  own  relations,  but  she  has  fre(|uently  attemptec 
to  make  others  do  likewise,  he  it  indirectly  through  he 
example  or  directly  through  soliciting  adherence  to  tb 
open  door  principle.  It  is  obvious  then  that  without  i 
reference  to  America's  policy  our  investigation  wouk 
be  incomplete  —  although  the  United  States  has  hersel 
never  exercised  any  "  control  "  whatsoever. 

From  the  inception  of  American  relations  with  Chin; 
at  the  birth  of  the  republic,  when  George  Washingtoi 
commissioned  as  consul  Major  Sha. v.  down  to  the  presen 
day  America  has  made  no  attempt  to  obtain  an  acre  o 
Chinese  territory.  She  has  contented  her-elf  with  tb 
development  of  an  extensive  trade  and  diplomaticall; 
with  the  establishment  and  maintenance  of  friendl; 
relations.  Thus  the  American  Secretary  of  State  de 
clined   in    1857   to  Lord   Napier  to  partic'pate  in   thi 

196 


UNITED  STATES 


197 


Chinese   War.'     In   the   iistructions   to   the   American 
representative  in  China  of  May  30th.  1859.  we  find  the 
following  significant  passage :  »     "  This  country,  you  will 
constantly  bear  in  nnnd.  is  not  at  war  with  the  Govern- 
ment of  China,  nor  does   '    "ek  to  enter  that  empire  for 
any  other  purposes  than  those  of  lawful  commerce,  and 
for  the  protection  of  the  lives  and  property  of  its  citi- 
zens.    The  whole  nature  and  policy  of  our  Government 
must  necessarily  confine  our  action  within  these  limits, 
and    deprive   us   of   all    motives,    either   of   territorial 
aggrandizement  or  the  acquisition  of  political  power  in 
that  distant  region."     In  the  following  year  the  United 
States  concluded  a  Treaty  of  Peace.  Amity,  and  Com- 
"lerce  with  China.     In  this  treaty,  made  at  a  time  when 
the    Chinese    Government    appeared    to    be    peculiarly 
friendl-'.s.  we  find  the  remarkable  stipulation  that  "if 
any   other   nation   should   act   unjustly   or   oppressively 
(to  vards  China)  the  United  States  will  exert  its  good 
offices,  on  being  informed  of  the  case,  to  bring  about 
an  amicable  arrangement  of  the  question,  thus  showing 
their  friendly  feelings."  '' 

It  was  the  American  envoy  to  China.  Anson  Burlin- 
game,  who  first  advocated  tne  "  open  door  "  and  called 
a  halt  to  the  attempts  at  selfish  exploitation  which 
appeared  to  guide  the  foreign  powers  in  their  attitude 

>  See  Senate  Document  J5th  Congress,  ist  Session,  Vol.  12.  No  47 

See  Senate  Document  35th  Congress,  ist  Session,  Vol.  12   No  47 

•See  Malloy.  "Treaties."  Vol.  i,  page  212,  Article  I  ^^' 


h:-rn\. 


198      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

toward  China.     So  well  had  he  gained  the  sympathy 
and  friendship  of  the  Chinese  people  that  he  was  invited 
to  become  the  head  of  a  Chinese  embassy  to  all  the  treaty 
powers.     The    Burlingame    treaty,    negotiated    between 
China  and  the  United  States,  was  strikingly  fair  and 
gave  full  recognition  to  China  of  her  rights  of  eminent 
domain  over  all  her  territory,  even  including  that  occu- 
pied  by   foreign   merchants."     In   Article   VIII    "The 
United  States,  always  disclaiming  and  discouraging  all 
practices  of  unnecessary  dictation  and  intervention  by 
one  nation  in  the  affairs  or  domestic  administration  of 
another,  do  hereby  freely  disclaim  and  disavow  any  inten- 
tion or  right  to  intervene  in  the  domestic  administration 
of  China  in  regard  to  the  construction  of  railroads,  tele- 
graphs or  other  material  internal  improvements." 

The  formal  declaration  of  the  open  door  doctrine  was 
made  in  1899.  Towards  the  close  of  the  nineteenth 
century  the  commercial  and  political  position  of  the 
United  States  in  China  had  begun  markedly  to  decline. 
The  reason  for  this  is  mainly  to  be  found  in  the  activities 
of  other  Powers.  "When  in  1894,— remarks  Rock- 
hill «— the  new  era  of  rapid  encroachment  on  China 
by  its  powerful  neighbors  began,  it  became  apparent  to 
the  United  States  that  if  it  did  not  take  measures  to 
check  the  movement  its  trade  would  be  wiped  out,  its 

♦  See  Malloy,  "  Treaties,"  Vol.  I.  page  236,  Article  I. 
i>ee  Journal  of  the  American  Asiatic  Association.  Vol.  XIV,  No. 


II 


iai 


\-.^  V 


?^- 


^ms^^^m:!W^^m^:^'w^w^ 


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rlw-'r:-  i^Bmjy.  i.wifli. 


UNITED  STATES 


199 


I  i 


religious   and   educational   interests   restricted,   and   its 
influence   and    prestige    with    the    Chinese    reduced    to 
naught."     The  Washington  Governmert  ..^adily  recog- 
nized the  danger  and   initiated  interr  at'onal   artion   in 
China's  favor.     With  a  view  to  secu  in;;  equal  opor- 
tunities  in  the  development  of  China's  uaae,  wai;h  was 
believed  to  offer  vast  fields  for  commercial  and  financial 
enterprise.  America's  first  object  was  to  prevent  the  par- 
tition of  China,  and  particularly  the  absorption  of  Man- 
churia by  Russia,  and  also  the  acquisition  by  any  single 
Power  of  exclusive  interests  and  "  rights."     To  that  end 
Mr.  Hay  sent  his  famous  notes  to  the  several  Powers. 
The  so-called  policy  of  "  open  door."  for  the  first  time 
officially  pronounced  at  that  occasion,  demanded  formal 
assurances  that  each  power  within  its  respective  sphere 
of  whatever  influence :  «     "  First :     Will  in  no  way  inter- 
fere with  any  treaty  port  or  any  vested  interest  within 
any  so-called  '  sphere  of  interest '  or  leased  territory  it 
may  have  in  China. 

"  Second :  Thai  the  Chinese  treaty  tariflF  of  the  time 
being  shall  apply  to  all  merchandise  landed  or  shipped 
to  all  such  ports  as  are  within  said  '  sphere  of  interest ' 
(unless  they  be  '  free  ports  ').  no  matter  to  what  nation- 
ality it  may  belong,  and  that  duties  so  leviable  shall  be 
collected  by  the  Chinese  Government. 

♦u'  M^'-^^o'"'"'  "P-  ^'^-  ^°-  ^-    S«  a'-^o  "Foreign  Relations  of 
the  United  States."  1899,  pages  128  ff. 


Sl.i.Si 


^         rV-t-  % 


20O 


FOREIGX  FIXAXCIAL  CONTROL  IX  CHIXA 


"  Third :  That  it  will  levy  no  higher  harbor  dues  on 
vessels  of  another  nationality  frequenting  any  port  in 
such  '  sphere  '  than  shall  he  levied  on  vessels  of  its  own 
nationality,  and  no  higher  railroad  charges  over  lines 
built,  controlled  or  operated  within  its  '  sphere  '  on  mer- 
chandise belonging  to  citizens  or  subjects  of  other  nation- 
alities transported  through  such  '  sphere  '  than  shall  be 
levied  on  similar  merchandise  belonging  to  its  own 
nationals  transported  over  equal  distances." 

All  powers  promptly  acknowledged  adherence  to  the 
principle  of  the  "  open  door  -  as  set  out  in  the  circular. 
But  the  proposition,  as  Mr.  Willard  Straight  remarks, 
"  favorably  received  at  first  and  reaffirmed  in  the  nego- 
tiations which  followed  the  relief  of  Peking,  won  the 
adherence  of  other  nations  not  because  of  any  particular 
consideration   for  China   but   because  of   their   mutual 
jealousy  and  their  realization  that  partition  would  im- 
pose upon  them  responsibilities  which  they  might  find 
it  difficult  to  bear.     They  did  not  therefore  surrender 
the  ports  which  they  had  forcibly  leased,  but  their  accep- 
tance of  the  •  open  door '  doctrine  nevertheless  marked 
the  beginning  of  a  financial  and  commercial,  rather  than 
territorial,  definition  of  their  respective  interests."  ^ 

The  United  States  should  find  several  other  occasions 
to  1-eenforce  the  demand  for  "  open  door."  The  next 
step  taken  in  China's  favor  was  a  circular  note  of  July 

•See  VV.  Straight.  "China's  Loan  Negotiations."  page  124. 


msLi.\Ltm^^i6.  :jz:^  ^fi> 


UNITED  STATES 


20I 


3,  1900,  inviting  the  Powers  cooi  rating  in  China  against 
the  Boxers  to  adhere  to  the  principles  maintained  by  the 
United  States  on  the  Chinese  question."  In  this  circu- 
lar Mr.  hay  declared  the  policy  of  the  Jnited  States 
to  be:  "To  seek  a  solution  which  may  bring  about 
permanent  safety  and  peace  to  China,  preserve  Chinese 
territorial  and  administrative  entity,  protect  all  rights 
guaranteed  to  friendly  powers  by  treaty  and  international 
law,  and  safeguard  to  the  world  the  principle  of  equal 
and  impartial  trade  with  all  parts  of  the  Chinese  Em- 
pire." In  1901  the  United  States  refused  to  assent  to 
the  imposition  of  an  oppressive  indemnity  upon  China 
which  v.'ould  make  her  the  fiscal  vassal  of  foreign  powers 
for  an  indefinite  period.  Later  on  the  American  Gov- 
ernment remitted  to  China  a  substantial  proportion  of 
its  Boxer  indemnity.  On  February  ist,  1902,  Mr.  Hay 
sent  a  memorandum  to  the  Poweis  protesting  against 
monopolistic  concessions  made  to  Russia  by  China, 
which  would  "  distinctly  contravene  treaties  of  China 
with  foreign  Powers,  afifect  rights  of  citizens  of  the 
United  States  by  restricting  rightful  trade,  and  tend  to 
impair  sovereign  rights  of  China  and  diminish  her  ability 
to  meet  international  obligations."  ^ 

America's   adherence   to   the   "  open   door "   doctrine 
found  finally  an  expression  in  the  agreement  between  the 

'"Foreign  Relations  of  the  United  States,"  Appendi.x  to  1901,  Af- 
fairs in  Qiina,  page  12. 
•  See  "  Foreign  Relations,"  1902,  page  275. 


i 


V,.- 


,v 


202      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

United  States  and  Japan  of  November  30th,  1908/"  in 
which  we  find  the  following  passages:     "  The  policy  of 
both  Governments,  uninfluenced  by  any  aggressive  ten- 
dencies, is  directed  to  the  maintenance  of  the  existing 
status  quo  in  the  region  above  mentioned  and  to  the 
defense  of  the  principle  of  equal  opportunity  for  com- 
merce and  industry  in  China.  .  .  .  They  are  also  de- 
termined to  preserve  the  common  interest  of  all  powers 
in  China  by  supporting  by  all  pacific  means  at  their  dis- 
posal the  independence  and  integrity  of  China  and  the 
principle  of  equal  opportunity  for  commerce  and  indus- 
try of  all  nations  in  that  Empire."     The  year  1908  saw 
also  an  unofficial  reaffirmation  of  the  same  policy,  when 
Mr.  William  Howard  Taft  addressed  the  Chamber  of 
Commerce  at  Shanghai.     Since  the  foreign  policy  of  the 
United  States  was  subsequently  to  be  directed  by  Mr. 
Taft,  the  respective  passage  of  his  speech  requires  quo- 
tation : 

"  The  United  States  and  others  who  sincerely  favor 
the  open  door  polic>'  will,  if  they  are  wise,  not  only 
welcome,  but  will  encourage  this  great  Chinese  Em- 
pire to  take  long  steps  in  administrative  and  govern- 
mental reform,  in  the  development  of  her  natural 
resources  and  the  improvement  of  the  welfare  of  her 
people.  In  this  way  she  will  add  great  strength  to  her 
position  as  a  self-respecting  Government,  may  resist  all 
"  See  Malloy,  "  Treaties,"  Vol.  I.  page  1046. 


^m^^ 


"'^■'tSUL-MnSHF- 


r  M»9 1  iin^rfiiiiiMin"  'vsXBimsmt: '  -.^iaasfWics^fis  t^si 


'■;i^^iii^:^   -i.    tlk'f:^.' 


UxVITED  STATES 


203 


possible  foreign  aggression  seeking  undue,  exclusive  or 
proprietary    privilegep    in    her    territory,    and    without 
foreign  aid  enforce  an  open  door  policy  of  equal  oppor- 
tunity to  all.     I  am  not  one  of  those  who  view  with 
alarm  the  effect  of  the  growth  of  China  with  her  teem- 
ing millions  into  a  great  industrial  empire.     I  believe 
that  this  instead  of  injuring  foreign  trade  with  China 
would  greatly  increase  it,  and  while  it  might  change  its 
character  in   some  respects,   it  would  not  diminish  its 
profit.     A   trade   which  depends   for   its  profit  on   the 
backwardness    of    a    people    in    developing    their    own 
resources  and  upon  their  inability  to  value  at  the  proper 
relative  prices  that  which  they  have  to  sell  and  that 
which  they  have  to  buy  is  not  one  which  can  be  counted 
upon  as  stable  or  permanent.  .  .  .  For  the  reasons  I 
have  given,  it  does  not  seem  to  me  that  the  cry  of  '  China 
for  the  Chinese  '  should  frighten  any  one.     All  that  is 
meant  by  that  is  that  China  should  devote  her  energies 
to  the  development  of  her  immense  resources,   to  the 
elevation  of  her  industrious  people,  to  the  enlargement 
of  her  trade  and  to  the  administrative  reform  of  the 
Empire  as  a  great  national  government.     Changes  of 
this  kind  would  only  increase  our  trade  with  her.     Our 
greatest  export  trade  is  with  the  countries  most  advanced 
m  business  methods  and  in   the  development  of  their 
particular  resources.     In  the  Philippines  we  have  learned 
that  the  policy  which  is  best  for  the  Filipinos  is  best  in 


igaiiifciywr : 


ri-v  j'ir: 


9^^  un^npfffiMt : ' —  --^i^i  wLBvr. 


r^M^^i^ 


MMM* 


204      FOREIGX  FIXAN'CIAL  CONTROL  IN  CHINA 

the  long  run  for  the  countries  who  would  do  business 
with  the  Islands."  ^^ 

Besides  its  political  importance  Mr.  Taft's  speech  is 
of  great  significance  since  it  inaugurates  a  period  of  more 
vigorous  participation  on  the  part  of  America  in  the 
financial  development  of  the  Chinese  Empire.     Ameri- 
can finance  in  China  had  up  to  then  been  singularly  un- 
successful, and  had  met  with  several  failures.     The  first 
instance  of  this  kind  was  the  failure  of  American  fi- 
nanciers to  obtain  the  contract  for  the  construction  of 
the   Peking-Hankow   line.     The   American   group   was 
working  hard  to  obtain  this  concession.     But  in   1907 
the  Belgian  Soriete  d'Etude  de  Chemins  de  fer  en  Chine 
appeared  on  the  scene  at  the  right  moment  and  with  the 
material    and    moral    backing    of    France    and    Russia 
obtained  the  concession  in  May  of  the  same  year.'- 

American  financiers  then  formed  the  American-China 
Development  Company  under  Mr.  Calvin  Brice.  with 
the  purpose  of  building  the  Hankow-Canton  Railway. 
A  contract  was  signed  between  this  company  and  Dr. 
Wu  Ting-Fang  acting  as  representative  of  Mr.  Sheng 
Hsuan-Huai  in  April.  uSqS.'^  The  company  was  to 
provide   L4.ooo,ooo.     In    1899   Mr.    Parsons    surveyed 

"  See  Millard,  op.  cit.,  page  375. 

^J  -See  U.  S.  Monthiy  Consular  Reports  of  1898,  Vol.  LVIII    No. 

336^3^9*"  ^''*"^  ^'"'  ''°°'''"  '  ^'''"^'"  ^'°-  '•  '^'  ^°'-  ^^^-  P'^*^' 


'^^mmk'i^ 


■■J^ii^4ff.t^-J 


UNITED  STATES 


205 


the  line.     To  go  into  the  details  of  the  contract  is  un- 
necessary since  it  is  a  dead  letter  to-day.     For  verv  soon 
a  French-Belgian  combination  began  to  undermine  the 
scheme  which  with  the  death  of  Mr.  Brice  had  lost  its 
mam  supporter.     That  the  Belgians  themselves  ultimately 
suffered  defeat  must  be  ascribed  in  the  main,  accord- 
ing to  Mr.   Kent,   to  the  course  taken  by    he  Russo- 
Japanese  War.'^     The  American  element  bee.    >e  para- 
mount again  by  the  influence  of  J.  P.  Morgan.     Finally, 
however,  the  Huanese  party,  supported  bv  the  Progres- 
sives of  Kuangtung,  pressed  for  the  annulment  of  the 
concession,  which  was  arranged  in  September,  1905,  the 
American  Government  being  glad  to  rid  itself  of  any  fur- 
ther connection  with  a  business  that  had  been  discredit- 
able from  the  outset.     The  road  was  given  over  to  the 
provincial  authorities. 

The  third  large  scale  American  railroad  project  that 
remained  without  success  was  Mr.  Harriman's  Man- 
churian  railroad  scheme  which  served  as  forerunner  to 
Mr.  Knox's  Manchurian  "  neutralization  "  scheme  A 
detailed  account  of  these  negotiations  is  given  in  J  O 
P.  Bland's  book  on  "  Recent  Events  and  Present  Policies 
in  China,"  of  which  account  we  shall  give  a  brief  sum- 
mary.'' 

In  September,  1905.  shortly  after  the  signature  of  the 

"  See  Kent.  op.  cit.,  pages  no  ff. 
^-  bee  Bland,  op.  cit..  Chapter  XT. 


206      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

Portsmouth  Treaty,  Mr.  E.  H.  Harriman  proposed  tc 
Japan  .i  joint  American-Japanese  ownership  and  work- 
ing of  the  South  Manchurian  Railway.  The  proceed- 
ings on  the  side  of  China  and  Japan  were,  in  Mr.  Bland's 
words,  "  so  instinct  with  duplicity  and  diplomatic  sharp 
practice  that  it  is  impossible  to  form  an  opinion  on  the 
real  merits  of  this  peculiar  question."  The  negotiations 
did  not  bear  any  fruit  and  nothing  was  heard  of  Mr. 
Harriman's  scheme  until  1909. 

In  the  meanwhile  the  Chinese  Government,  represented 
by  Tang  Shao-yi,  had,  in  1907,  arranged  with  Mr.  VV.  D. 
Straight,  United  States  Consul-General  at  Mukden,  for 
the  creation  of  a  Manchurian  Bank.  This  institute,  fi- 
nanced by  American  capital,  was  to  be  the  financial  agent 
of  the  Manchurian  Government,  and  was  to  undertake, 
together  with  British  financiers,  the  construction  of  a 
line  from  Hsinmintung  to  Aigun  and  other  important 
enterprises  for  the  development  of  the  commerce  and 
industr>'  of  Manchuria.  For  the  establishment  of  the 
institute  a  loan  of  $20,000,000  was  intended  and  Messrs. 
Kuhn,  Loeb  and  Co.  of  New  York  signified  to  the  State 
Department  at  Washington  their  readiness  to  undertake 
to  finance  the  Manchurian  Bank.  But  owing  to  a  change 
in  China's  policy  following  the  death  of  the  Emperor 
Kuang  Hsu  and  due  to  Japanese  obstruction  the  scheme 
fell  through  late  in  1908. 

In   December  of    the  same   year   negotiations    were 


UNITED  STATES 


207 


opened  at  New  York  in  regard  to  the  Chinese  Eastern 
Railway  which  the  Russian  Government  was  willing  to 
sell  to  Ameri  an  financiers  provided  Japan  would  agree 
to  sell  the  South  Manchurian  line.  Both  schemes  seemed 
to  promise  success.  But  in  1909  Mr.  Harriman  died 
and  his  plans  died  with  him. 

Nevertheless,    Mr.    Harriman's    schemes    had    borne 
fruit  in  so  far  as  they  served  as  the  foundation  to  Mr. 
Knox's  scheme  for  the  neutralization  of  the  Manchurian 
railways  which  was  to  meet  with  such  spectacular  fail- 
ure.    Mr.   Ki:-)x  in   1909  submitted  his  scheme  simul- 
taneously to  the  British,  German,  Russian,  Japanese  and 
Chinese  Governments  without  having  previously  received 
Russia's  and  Japan's  acquiescence.     The  whole  proposi- 
tion may  be  best  illustrated  by  quoting  Mr.   Bland :  >° 
"The  purport  of  Mr.   Knox's  scheme  amounted  to  a 
proposal  that  the  Powers  addressed  should  authorize  the 
organization  of  an  international  syndicate  to  buy  out  the 
Russian  and  Japanese  railway  interests  in  Manchuria. 
In  failing  to  consult  Russia  and  Japar  separately,  the 
Secretary  of  State  apparently  assumed  that  the  results 
of  the  negotiations  which  had  taken  place  between  the 
governments  of  these  powers  and  Mr.  Harriman  war- 
ranted him  in  taking  their  consent  for  granted.     Politi- 
cally speaking,  everything  in  the  situation  of  the  moment 
pointed  to  the  necessity  of  securing,  at  least,  the  specific 
"  See  Bland,  op.  cit.,  pages  317  ff. 


ms^. 


208      FOREICX  FIXAXCIAL  CONTROL  IN  CHINA 

approval  of  the  Russian  Government  on  behalf  of  Mi 
Harriman's  schemes  before  launching  the  internationi 
scheme  as  a  definite  proposal.  .  .  .  The  scheme  as  pre 
sented  was  a  political  gaffe,  and  the  blunder  was  aggra 
\ated  by  the  suggestion  that,  if  the  powers  were  unwill 
ing  to  join  in  the  general  neutralization  scheme,  the 
should  at  least  unite  in  the  financing  and  constructio 
of  the  Chinchow-Aigim  Railway.  In  other  words,  i 
Russia  and  Japan  were  unwilling  to  abandon  thei 
'special  interests'  in  this  region,  they  and  the  othe 
powers  were  invited  to  create  new  interests  to  compet 
with  those  of  the  existing  railways.  .  .  .  Their  suspi 
cions  thus  aroused,  the  neutralization  scheme  wa 
doomed,  and  the  Russo-Japanese  entente  to  divide  Man 
churia  and  Mongolia  began  frcni  ,  moment  to  assume 
definite  form  and  substance.  Russia  and  Japan  politeb 
but  firmly  rejected  Mr.  Knox's  proposals.  .  .  .  Th( 
immediate  result  of  the  American  neutralization  schemi 
was  the  Russo-Japunese  agreement  of  the  4th  of  July 
1910." 

Russia  and  Japan  having  rejected  Mr.  Knox's  pro 
posals,  there  is  no  wonder  then  that  the  Chinchow-Aigur 
Railway  scheme  was  likewise  doomed.  "  It  was  de- 
nounced as  a  deep-laid  plan  for  attacking  Russian  terri- 
tories in  Eastern  Siberia  and  Russia's  special  interests 
in  Mongolia  and  Manchuria,"  says  Bland.  In  recent 
times  the  southern  half  of  it,  or  practically  the  southerr 


li- 


h^  t 


UNITED  STATES 


209 


half  of  it.  has  been  granted  to  Japan  by  China,  and  now 
Russia  has  obtained  the  right  to  cover  the  north-rn  sec- 
tion, which,  however,  does  not  exactly  correspo.  '  with 
the  route  as  planned  originally.'^  Russia's  railway  is 
to  run  from  Blagoveshchensk,  on  the  left  of  the  Amur 
Kivt-r.  to  Aigim.  Mergen  and  Harbin,  with  a  connection 
l^tween  Mergen  and  Tsitsihar.  The  line  gives  Russia 
the  final  political  dominance  over  her  Xorth-Manchurian 
sphere. 

The  American  Government's  policy  was  irreproachable 
and  just.     Mr.   Bland  calls  it  "  a  policy  of  righteous- 
ness,   tempered    by    enlightened    self-interest  —  but    it 
required  the  delicate  handling  of  a  Metternich  to  make 
It  eflfective  and  to  dominate  the  equally  enlightened  self- 
interest    of    other    powers.""*     The    interests    of    the 
powers  concerned  happened  to  run  in  an  opposite  direc- 
tion; their  "  control  "  in  China  would  have  been  greatly 
diminished   had   the   American   proposal   been   realized 
Consequently  the  American  policy  found  much  opposi- 
tion  and   criticism.     M.    Leroy   Beaulieu.   the   eminent 
french   scholar,    for   instance,   criticizes   as    follows: '» 
"Les   diverses   puissances   europeennes    ayant    indique. 
sous  une  forme  ou  sous  une  autre,  que  leur  attitude  vis- 

ulr  p,^^'^  ^''''"  R«^'«^."  Vol.  I,,  page  151. 
"  See  Bland,  op.  cit..  page  319  v  ^      s 

.sie'd^ans''ie^S^I^:''r-;  "}-%  ^^^^^-U"'"^-  Le  Japon  et  la  Rus- 
^fa^ch%.  fo,o.  page  io,.'^''"^'"''"'""-     ^'^^ -'^    ^ran^aise." 


■^*.lW»»-r-^*Ha.'  :  ^»V<JW£ffl^KZ^S^W^ 


iio     FOREIGN  FI.VAN'CIAL  CONTROL  IN  CHINA 

a-vis  de  la  proposit:  ->  americaine  etait.  en  dcfinitiv 
subordonnee  a  celle  des  deux  principaux  interesses, 
cession  des  chemins  de  fer  existant  en  Mandchourie  cj 
aujourd'hui,  itne  questic^n  resolue  par  la  negative 
ahandonnee.  Mais  la  ne  se  bornait  pas  rinitiati\ 
americaine.  ...  I, a  diplomatic  americaine  est  encore  ii 
pen  jeune  et  fruste,  elle  I'a  montre  en  cette  occasioi 
oil  elle  a  use  d'habiletcs  quelque  peu  pueriles.  Rendi 
publiques  des  propositions  aussi  graves  que  le  rachat  ( 
la  neutralisation  des  chemins  de  fer  russes  et  japona 
de  Mandchourie  et  la  construction  d'une  nouvelle  grand 
ligne  dans  cette  province,  sans  avoir  preablement  n  'goci 
avec  Tokio  et  Saint-Petersbourg.  cctait  commettre  u 
actc  assurement  peu  aimable  sinon  discourtois,  et  c'eta 
aggraver  encore,  par  un  manquement  de  forme,  de 
dispositions  qui  devaient  necessairement  etre  peu  favoi 
ables  au  fond." 

In  spite  of  this  diplomatic  faux  pas  the  world  gav( 
nevertheless,  to  America  credit  for  appreciating  th 
dangerous  situation  in  Manchuria  and  for  the  courag 
to  face  it.  At  the  same  time  a  vigorous  initiative  oi 
the  part  of  American  finance  helped  much  toward 
strengthening  American  prestige  in  the  Orient.  Th 
Manchurian  bank  question  marked  the  beginning  o 
negotiations  which  led  to  the  organization  of  an  Ameri 
can  group,  the  conclusion  of  the  currency  loan  and  th( 
formation  of  an  international  S3mdi'_^£e.     The  Unite( 


ik- 


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HINA 

definitive, 
Presses,  la 
lourie  est, 
■gative  et 
['initiative 
encore  un 
occasion, 
Rendre 
rachat  et 

japonais 
le  grande 
It  V  'gocie 
nettre  un 
et  c'etait 
rme,  des 
;u  favor- 
rid  gave, 
iting   the 

courage 
iative  on 

towards 
nt.  The 
ining  of 
1  Ameri- 

and  the 
:  United 


UNITED  STATES  211 

States  Government  had  recognized  that  it  could  not  be 
of  any  real  service  to  China  except  through  its  coopera- 
tion with  other  powers.     When,  therefore,  in  May.  1909 
the  Bru.sh.  French  and  German  financial  groups  were 
alxnu  to  conclude  an  agreement  for  the  construction  of 
the   ilukuang   Railways,   the   United   States   demanded 
admission,  last  not  least  in  view  of  the  fa^t  that  the 
Hukuang  loan  reopened  the  question  of  customs,  revision 
m  which  the  American  Government  was  keenly  inter- 
ested.-    To    this    Willard    Straight    remarks:-     <•  !„ 
order,  therefore,  that  the  United  Statr-    night  be  entitled 
to  a  practical,  and  not  merely  to  a  theoretical,  voice  in 
this  matter,  as  well  as  to  assure  to  American  manufac- 
turers a  share  in  the  profits  rf  Chinese  railway  construc- 
tion and  the  business  arising  therefrom,  it  was  essential 
that  representative  American  capitalists  should  partici- 
pate m  the  Hukuang  loan.     The  Department  of  State 
offered  this  opportunity  to  the  bankers  already  interested 
m  the  loan  proposed  by  Mr.   Tang  Shao  Yi  and  the 
Amencan  Group  was  organized,  creating  an  instrument 
which  It  was  hoped  might  enable  the  Administration  not 
onl,   to   further  the  interests  of   American   trade,   but 
effectively  to  assist  China  in  obtaining  the  consent  of 
the   powers    to    the   customs    revision    she    so   greatlv 
desired."  ^       ^ 

''III  lf°-'l^  Relations."  1909.  page  160. 
See  Straight,  op.  cit.,  page  127. 


212      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


The  Administration's  point  of  view  and  interest  in  the 
matter  finds  an  excellent  illustration  in  the  telegram 
which  President  Taft  sent  to  the  Prince  Regent  of  China 
on  July  15th,  1909.  President  Taft  writes:  "I  am 
disturbed  at  the  reports  that  there  is  certain  prejudiced 
opposition  to  your  Government's  arranging  for  equal 
participation  by  American  capital  in  the  present  railway 
loan.  To  your  wise  judgment  it  will  of  course  be  clear 
that  the  wishes  of  the  United  States  are  based,  rot  only 
upon  China's  promises  of  1903  and  1904,  confirmed  last 
month,  but  also  upon  broad  national  and  impersonal 
principles  of  equity  and  good  policy  in  which  a  regard 
for  the  best  interests  of  your  country  has  a  prominent 
part.  ...  I  have  an  intense  personal  interest  in  making 
the  use  of  American  capital  in  the  development  of  China 
an  instrument  for  the  promotion  of  the  welfare  of  China, 
and  an  increase  in  her  material  prosperity  without  en- 
tanglements or  creating  embarrassments  affecting  the 
growth  of  her  independent  political  power  and  the  preser- 
vation of  her  territorial  integrity." 

The  admission  of  the  American  group  to  the  Hukuang 
loan  and  the  various  international  loan  negotiations  will 
be  subject  matter  of  the  following  chapter.  The  reason 
for  the  ultimate  withdrawal  of  the  American  group 
from  the  international  combine,  however,  is  a  matter 
of  strictly  American  policy,  which  therefore  requires  our 
immediate    attention.     The    American    Banking    group 


UNITED  STATES 


213 


withdrew,  due  to  President  Wilson's  refusal  to  continue 
the  moral  support  of  the  Government.  In  support  of 
his  refusal,  President  Wilson  gave  in  part  this  state- 
ment to  the  press :  -''  "  The  conditions  of  the  loan  seem 
to  us  to  touch  very  nearly  the  administrative  independ- 
ence of  China  itself;  and  this  administration  does  not 
feel  that  it  ought,  even  by  implication,  to  be  a  party  to 
those  conditions.  The  responsibility  on  its  part  which 
would  be  implied  in  requesting  the  bankers  to  undertake 
the  loan  might  conceivably  go  the  length  in  some  un- 
happy contingence  of  forcible  interference  in  the  finan- 
cial, and  even  the  political  affairs  of  that  great  Oriental 
State,  just  now  awakening  to  a  consciousness  of  its 
power  and  of  its  obligations  to  its  people.  The  condi- 
tions include  not  only  the  pledging  of  particular  taxes, 
some  of  them  antiquated  and  burdensome,  to  secure  the 
loan,  but  also  the  administration  of  these  taxes  by 
foreign  agents.  The  responsibility  on  the  part  of  our 
government  implied  in  the  encouragement  of  a  loan  thus 
secured  and  administered  is  plain  enough  and  is  obnox- 
ious to  the  principles  upon  which  the  government  of 
our  people  rests.  .  .  .  Our  interests  are  those  of  the 
open  door  —  a  door  of  friendship  and  mutual  advantage. 
This  is  the  only  door  we  care  to  enter." 

President  Wilson's  objections  were  exclusively  directed 
against    certain    "  control "    provisions,    which    will    be 

**  See  Straight,  op.  cit.,  page  159. 


214      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

analysed  in  the  following  chapter.  His  motives  were 
based  upon  the  desire  to  be  of  a  genuine  friendship  and 
of  an  ultimate  benefit  to  China  as  well  as  to  America. 
They  expressed  a  high  regard  for  the  sovereign  rights 
of  China.  Yet  the  President's  action  has  found  criticism 
coming  from  American  quarters  closest  in  contact  with 
the  Chinese  situation. 

Mr.  Rockhill,  a  short  time  before  his  death,  in  1914, 
made  the  following  comment : "  "  Before  retiring 
from  the  scene  of  activity  in  China  our  Government,  in 
1909,  made  one  more  attempt  to  maintain  the  policy 
of  the  'open  door'  and  justify  the  expectations  of  the 
discoverers  of  the  panacea  called  '  dollar  diplomacy,' 
by  securing  American  financial  participation  in  several 
important  loans  which  the  Government  of  China  was 
seeking  to  negotiate  with  various  foreign  banks.  I  will 
not  dwell  on  the  stirring  incidents  which  marked  the 
fleeting  appearance  of  America  in  the  field  of  finance 
and  politics  in  China,  but  I  cannot  pass  it  by  without 
mention  of  the  permanent  moral  benefits  it  brought  us, 
the  practical  assistance  it  rendered  China  while  it  lasted, 
in  defending  her  rights  and  interests,  and  the  profound 
regret  of  China  and  her  friends  when,  moved  by  idealist 
views  and  imperfect  information,  the  present  administra- 
tion at  Washington  saw  fit,  in  the  spring  of  last  year, 
to   withdraw    its    support    from   the    American   banks. 

»» See  "  Far  Eastern  Review,"  Vol.  ii,  page  229. 


UNITED  STATES 


215 


While  declaring  that '  our  interests  are  those  of  the  open 
door,  a  door  of  friendship  and  mutual  advantage,  this 
is  the  only  door  we  care  to  enter,'  it  declined  to  take 
a  step  to  show  the  one  or  to  secure  the  other.  I  only 
know  of  one  blow  equally  heavy  which  has  been  dealt 
our  interests,  our  prestige,  and  our  influence  in  China: 
it  was  the  cancellation,  in  1905,  of  the  concession  of  the 
American-China  Development  Company.  ...  In  con- 
clusion it  seems  clear  to  me  that  so  long  as  we  shut  our 
eyes  to  the  undoubted  fact  that,  in  the  East  at  least, 
from  Stamboul  to  Tokyo,  politics,  finance,  and  trade  go 
hand  in  hand,  and  that  neither  the  profits  of  trade  can 
be  fully  reaped  nor  our  influence  and  prestige  be  ade- 
quately upheld  without  incurring  the  responsibilities 
incident  to  political  and  financial  activity,  we  must  be 
content  to  play  a  modest,  effaced  role  in  the  Far  East, 
unworthy,  in  my  opinion,  of  our  great  country  and  its 
vast  interests  in  the  Pacific." 

"  Dollar  diplomacy,"  mentioned  by  Mr.  Rockhill,  has 
been  defined  by  Mr.  Willard  D.  Straight  as  the  "  logical 
manifestation  of  our  national  growth,  and  the  rightful 
assumption  '  •  United  States  of  a  more  important 

place  at  th  ..cil  table  of  nations.     The  new  policy 

aims  not  01  _>  o  protect  those  Americans  already  en- 
gaged in  foreign  trade  but  to  promote  fresh  endeavor 
and  by  diplomatic  action  pave  the  way  for  those  who 
have  not  yet  been,  but  who  will  later  be,  obliged  to  sell 


2l6      FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 

either  capital  or  goods  abroad."  -*  Mr.  Straight,  repre- 
sentative of  the  American  group,  was  a  most  energetic 
promoter  of  the  international  syndicate.  He  wrote  in 
1913:-''  "It  is  to  China's  interest  that  this  combina- 
tion should  Ije  maintained,  and  it  is  to  the  interest  of 
China  as  well  as  of  the  United  States,  that  we  should 
retain  our  present  position  therein.  China's  great  prob- 
lem to-day  is  that  of  finance.  It  is  to  her  advantage 
that  we  are  entitled  to  a  practical  voice  in  its  solution, 
and  it  is  to  the  advantage  of  American  trade  that  the 
United  States  continue  to  be  an  active  party  in  Chinese 
loan  negotiations." 

A  similar  stand  has  been  taken  by  the  American  Asso- 
ciation.^'' "  The  policy  of  the  United  States  Govern- 
ment in  discouraging  the  investment  of  American  capi- 
tal in  Chinese  railways  and  in  loans  to  the  Republic  has 
been  detrimental  to  our  merchants,  but  as  the  adminis- 
tration gains  a  clearer  view  of  the  situation  in  China  and 
begins  to  recognize  the  things  that  must  be  done  if  the 
United  States  is  to  share  in  this  vast  trade  area,  there 
are  possibilities  of  some  modifications  of  this  policy 
which  is  believed  to  have  been  put  forth  without  suffi- 
cient investigation  and,  at  that,  on  sentimental  grounds. 
This  Association  should  use  every  means  in  its  power 
to    awaken    the    Government    in    Washington    through 

-'*  See  Straight,  op.  cit.,  page  121. 
-'  See  Straight  op.  cit.,  page  157. 
2"  See  "Far  Eastern  Review,"  Vol.  11,  page  360. 


*  ;■ 


^^^immmmmm 


m 


UNITED  STATES 


217 


I 

'4 

I 
1 

I 


whatever  means  it  can  find,  to  the  necessity  for  a  more 
^  igorous  poHcy  in  China  to  secure  for  us  and  to  hold 
open  when  secured  as  Hberal  advantages  for  the  extension 
of  our  trade  as  are  now  enjoyed  by  other  nationalities." 
Meanwhile  American  finance,  under  the  leadership  of 
the  American  International  Corporation,  has  attempted 
to  undertake  developments  in  China  independently  and 
without  government  support.     In  doing  so  the  Corpora- 
tion   wanted    to   avoid   transactions    clothed    with    any 
political  character,  adhering  strictly  to  business  lines.     In 
their  recent  contracts  for  railways  in  Central  China  the 
American  financiers  propose  to  proceed  on  a  new  basis.'^' 
The  Chinese  Government  was  to  remain  owner  of  the 
lines  constructed  and  would  issue  the  bonds.     Since  the 
Chinese  have  not  as  yet  a  sufficient  number  of  engineers 
and  technical  railway  men  to  construct  and  operate  the 
lines  arrangements  were  to  be  made  whereby  the  Chinese 
Government  will  secure  the  services  of  American  experts 
to  assist  them  in  the  management  of  the  new  roads.     For 
services  in  financing  and  in  directing  operation  the  Cor- 
poration would  receive  a  certain  percentage  of  the  profits 
in  operation. 

The  latest  developments  indicate  a  return  of  the  United 
States  Government  to  the  policy  of  approving  loans  by 
American  bankers  to  China.^^     The  bankers  will  give 

^7  See  Journal  of  the  American  Asiatic  Association,  Vol.  XVI,  No. 
12,  pages  373  ff. 
2«  See  New  York  Times,  July  30,  1918. 


2l8      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

assurance  "that  they  will  cooperate  with  the  Govern- 
ment and  follow  the  policies  outlined  by  the  Department 
of  State."  While  the  Government  assures  "that,  if 
the  terms  and  conditions  of  the  loan  are  accepted  by 
this  Government  and  by  the  Government  to  which  the 
loan  is  made,  in  order  to  encourage  and  facilitate  the 
free  intercourse  between  American  citizens  and  foreign 
states  which  is  mutually  advantageous,  the  Government 
will  be  willing  to  aid  in  every  way  possible  and  to  make 
prompt  and  vigorous  representations  and  to  take 
ever>'  possible  step  to  insure  the  execution  of  equitable 
contracts  made  in  good  faith  by  its  citizens  in  foreign 
lands."  It  is  also  "  hoped  that  the  American  group  will 
be  associated  with  bankers  of  Great  Britain,  Japan  and 
France." 

A  very  important  point  is  the  hoped  for  financial 
cooperation  between  the  United  States  and  Japan.  The 
American-Japanese  agreement  of  November  2,  1917, 
bids  fair  to  be  the  foundation  for  a  financial  cooperation 
between  the  two  countries  in  China."  It  has  removed, 
in  the  words  of  Mr.  Lansing,  "  a  feeling  of  suspicion 
as  to  the  motives  inducing  the  activities  of  the  other 
in  the  Far  East,  a  feeling  which,  if  unchecked,  promised 
to  develop  a  serious  situation." 

The  two  governments  furthermore  explicitly  "  deny 
that  they  have  any  purpose  to  infringe  in  any  way  the 
*»  Sec  end  of  Chapter  "  Japan." 


UNITED  STATES 


219 


independence  or  territorial  integrity  of  China,  and  they 
J  declare  furthermore  that  they  will  always  adhere  to  the 
principles  of  the  so-called  '  open  door  '  or  equal  oppor- 
tunity for  commerce  and  industry  in  China."  In  fact, 
the  reaffirmation  of  the  "  open  door "  policy  and  the 
introduction  of  a  principle  of  non-i.iterference  with  the 
sovereignty  and  territorial  integrity  of  China  are  reassur- 
ing factors  in  the  Far  Eastern  Question  for  the  reason 
that  both  Japan  and  the  United  States,  by  this  declara- 
tion, bind  themselves  to  see  that  China  will  obtain  a 
fair  deal,  not  only  at  the  hands  of  other  nations,  but 
from  themselves  as  well. 


'''  d. 


CHAPTER  VIII 

INTERNATIONAL   CONTROL 

International  financial  competition  in  China,  witl 

its  struggle  for  "  spheres  of  interest,"  and  national  "  con 

trol,"  has  during  later  years  gradually  given  way  to  inter 

national    cooperation    and    international    control.     Ai 

Anglo-German  agreement  between  the  Hongkong-Shang 

hai  Bank  and  the  Deutsch-Asiatische  Bank  for  mutua 

participation  in  administrative  and  railway  loans  to  Chin 

had,  as  we  have  seen,  existed  previous  to  the  "  battle  o 

concessions."     The  first  financial  transactions  done  i 

common  under  this  agreement  were  the  two  Chino-Japar 

ese  War  indemnity  loans  of  1896  and  1898,  of  Li6,ooO; 

000  each,  which  were  paralleled  by  a  Franco-Russian  loa 

of  400.000,000  francs  of  1895.^     All  three  loans  wer 

secured  by  the  Maritime  Customs  Revenue  administere 

by  the  International  Maritime  Customs  Service.-     Tl" 

Russo-French  loan  enjoyed  an  additional  guarantee  froi 

the  Russian  Government  while  the  Anglo-German  loa 

of  1898  was  charged  upon  certain  additional  likin  re^ 

enues  which  were  also  collected  by  the   Internation 

1  See  "  China  Year  Book."  191.3.  page  M2. 
-  See  Oiaptcr  I. 

220 


'.  r-"Ti~6af 


INTERNATIONAL  CONTROL 


221 


na,  with 
lal  "  con 

to  inter- 

rol.     An 

g-Shang- 

r  mutual 

to  China 

battle  of 

done  in 
lo-Japan- 
L 1 6,000,- 
;sian  loan 
tans  were 
ninistered 
ce.2  The 
ntee  from 
man  loan 
likin  rev- 
ernational 


Maritime  Customs  Service.  To  this  the  British  Repre- 
sentative refers  under  March  18,  1898,  as  follows:^ 
"  The  only  point  of  other  than  financial  or  commercial 
interest  is  the  provision  for  the  placing  under  the  control 
of  the  Inspector-General  of  Maritime  Customs  the  likin 
revenues  pledged  as  security,  for  this  may  have  import- 
ant future  results,  as  in  tue  case  of  every  other  measure 
likely  to  benefit  their  country,  the  Chinese  Government 
has  refused  to  take  this  step  until  forced  thereto  by 
necessity." 

Under  the  part  control  of  the  Maritime  Customs  Serv- 
ice falls  furthermore  the  Boxer  Indemnity-Service,  since 
payments  are  secured  upon  the  balance  of  the  revenues 
of  the  Maritime  Customs  after  payment  of  preexisting 
charges,  upon  the  Native  Customs  Revenues  at  open 
ports,  and  the  Salt  Gabelle.*  The  amortization  was  to 
commence  the  first  of  January,  1902,  payable  annually, 
and  shall  be  finished  at  the  end  of  the  year  1940.  The 
Anglo-German  loan  of  1898  was  followed  in  February, 
1905.  by  the  final  exchange-adjustment  of  the  Boxer 
Indemnity,  amounting  to  Li, 000,000  and  secured  by  the 
Peking  octroi  and  Shansi  likin.' 

That  the  collection  of  the  revenues  upon  which  these 
first  three  international  loans  and  the  Boxer  Indemnity 
were  pledged  fell  under  fore'gn  "  control  "  was,  as  we 

« See  British  Blue  Books,  "  China,"  No.  CIX,  1899,  No.  59. 
*  See  "  China  Year  Book,"  1913,  page  333. 
5  Ibidem. 


222      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

have  seen  due  to  the  fact  that  the  Maritime  Custom: 

were  at   that   time   under    foreign   expert   supervision 

This  supervision  had  become  a  stable  and  well  founde( 

institution  and  was  generally  recognized  as  a  source  o 

great  benefit  to  foreigners  as  well  as  to  Chinese.     Fev 

difficulties  were  therefore  encountered  when  these  loai 

services  thus  fell  automatically  under  foreign  "  control. 

But  the  case  was  entirely  different  with  "  control  "  em 

bodied  in  the  various  railroad  agreements,  the  first  o 

which  was  that  made  by  the  Chinese  Government  i 

1898,  with  the  British  and  Chinese  Corporation,  for 

loan  to  the  Imperial  Railways  of  North  China.     Th 

control  stipulations  of  most  of  the  railroad  agreemeni 

were  exceedingly  severe,  as  we  have  demonstrated  in  th 

preceding  chapters.     The  lenders,  besides  securing  a  fir: 

mortgage  on  the  railways,  were  entitled  to  a  share  in  tt 

profits  and  the  management  of  the  lines.     This  fori 

of  "control"  was  naturally  a  great  blow  to  Chine; 

pride  and   it  therefore    found   considerable   oppositic 

from   many   quarters.     The  first   international   railwc 

loan    agreement   new    altered    conditions    substantial! 

This  was  the  Anglo-German  Tientsin-Pukow  loan  agre 

ment  concluded  in  1908  by  the  same  banks  which  h« 

arranged  the  indemnity  loans  of  1896,  189S  and  190 

The    signature    of    the    Tientsin-Pukow    agreemei 

says  Mr.  Straight,"  "  marked  the  first  recognition  by  ti 

«  See  Straight,  op.  cit.,  p*ge  132. 


^^B?}i^>JA* 


INA 


INTERNATIONAL  CONTROL 


223 


Customs 
(crvision. 
founded 
lource  of 
56.     Few 
lese  loan 
control." 
rol  "  em- 
;  first  of 
nment  in 
m,  for  a 
na.     The 
jreements 
ted  in  the 
ing  a  first 
are  in  the 
his  form 
)  Chinese 
opposition 
1   railway 
stantially. 
)an  agree- 
vhich  had 
and  1902. 
igreement, 
ion  by  the 


banks  of  the  increasing  efficiency  of  the  *  Young  China  ' 
party.  These  men  demanded  the  radical  modification  of 
the  old  loan  terms.  They  considered  '  control '  subver- 
sive ot  China's  sovereign  rights  and,  flattered  by  the 
blandishments  of  rival  foreign  interests,  they  were  deter- 
mined to  exact  from  the  world  a  consideration  similar 
to  that  accorded  Japan  after  years  of  patriotic  self- 
sacrifice  and  conscientious  endeavor.  The  avowed  pur- 
pose of  these  officials  to  weaken  the  hold  of  the  foreigner 
on  China  was  heartily  applauded  throughout  the  prov- 
inres.  It  served  as  a  patriotic  issue  on  which  an  appeal 
could  be  made  tc  the  masses  and  a  cloak  under  which 
the  provincial  gentry  could  cover  their  real  purpose, 
which  was  to  restrict  the  extension  of  the  Peking  Gov- 
ernment's authority  by  railways  built  with  foreign  loans, 
or  otherwise,  and  their  determination  that  if  foreign 
loans  were  made,  the  chances  for  peculation  should  not 
be  monopolized  by  the  metropolitan  mandarins." 

The  agreement  of  January  13th,  1908,^  sanctioned  the 
flotation  of  a  loan  of  L5,ooo,ooo  at  five  per  cent,  issued 
to  the  Chinese  at  93  and  to  the  public  at  98^  for  a  term 
of  30  years,  repayment  to  commence  at  the  end  of  10 
years.  Of  the  total  loan  Li, 850,000  was  issued  by  the 
Hongkong  and  Shanghai  Bank  and  L3, 150,000  by  the 
Deutsch-Asiatische    Bank.     The    l*        v/as    accordingly 

^  See  "  Far  Eastern  Review,"  Supplement,  Nov.,  1909,  for  text  of 
the  Agreement. 


224      FORKIGN  nXANC  AL  CONTROL  IN'  CHINA 

subdivided  in  two  sections.  The  northern  portion  from 
Tientsin  extended  to  the  u;am!  Canai.  a  distance  of  385 
mdes.  and  was  built  by  Cerma;  aiMtal.  The  southern 
portion  extended  fron.  the  firand  Canal  to  I'ukow, 
2i6V,  miles,  and  was  built  by  British  capital.  Accord- 
ing to  Article  9  the  loan  is  serur,-|  i,y  .,  first  charge  npon 
hkm  and  internal  revenues  of  (  aihl.  Shantung,  and 
Kiangsu  Provinces,  amountinp  o  a  tUal  of  3.800.000 
Haikwan  taels  a  year. 

Regarding  administration  or      co-      ,]'•  of   .he  line, 
Article  17  of  the  agreement  prcides  thit .     "  The  con- 
struction and  control  of  the  railway  will  l>c  entirely  in 
the  hands  of  the   Imperial  Chinese  Government.     For 
the  work  of  the  northern  and  southern  sect!   as  respec- 
tively the  Chinese  Government  will  select  and  appoint 
fully   qualified    German   and    British   Chief    Rngineers 
acceptable  to  the  syndicate.     Tuese  two  Chief  Engineers' 
shall  be  under  the  orders  of  the  Managing  Dircaor.  or 
his  duly  authorized  representative,  and  will  carr     out 
all    the    wishes   of    the    Railway    Administrati  -n '  with 
regard  to  the  plan  and  construction  of  the  line.     They 
must  pay  all  due  respect  to  the  Director  Gener.  .  and 
the  Managing  Director.     The  terms  of  their  respective 
agreements  will  be  arranged  by  the  Director  General  01: 
his  sole  authority." 

To  ,>asure  Chinese  control  after  completion  Article 
concludes:     "  On  the  completion  of  the  line  the  Imperial 


INTERNATIONAL  (    J.\TROL 


325 


Chinese  Governnent  will  appoint  an  Engir^r-in-Chief. 
who  during  the  pt-  d  of  the  loan  shall  be  a  European 
without  reference       the    yndcate" 

By  1910  the  n  .iiey  u  4,  exh  d  uiid  it  became 
necessary  tu  raise  i  supplrm^-ntury  loan  of  L4.8or  000, 
divided  into  two  eciiii'  part  ,  to  con  ple'e  the  work 

Ui  the  Ticijf'  n.T'ukow  ."er-.tmcnt  ..f  1908  u  wa.-, 
for  h<  fif-t  tirn;  stip,  ated.  t  in  -ie  of  .^ujt  on 
the  loan  sen-ice.   the    lypothec;  ed  n^.  s  should   be 

adniinisten      by  th.    V.    ritimt 
principle    of     oini    ma'    .'emeni 
authority  wa     conftn;a      y   tr.. 
tract  upon  the    uidi  •  ->  .      the 
drawal  of  funt       !  ca-  Chi 

guilty  of  I  ecula      n. 

"  These  I  -ms,"  s,  •  s  tht  f  < 
distinctly  fav^rahN    !.,  f'hina 
been  '^pized  upf^n  .:       will  he 
in  future  aj.Tet  nents.        hr   i 
niun     iiions  are  convince 


u^ 

^    AS 

Tieiu 
^  t- 


">er 
-n. 


Thr 


vV     Cl 

)p  the  with 
ofticiais  were  found 


Lustern  Review,  "  were 
id  the  precedent  set  has 
>  d  to  obtain  better  terms 
>ard  f  F'osts  and  Com- 
the  I.  inagement  of  roads 
sIkhi  !  be  in  the  I  ids  ot  tne  Cover  iment.  And  in  the 
nands  t^  Gov«     !ment     hey  should  be  exceedingly 

P*""'  2jh      verythmg  depends   not   only   upon 

sagac       -  man.,  'emeu  t,  but  unon  scrupulous  treat'u  i.t  of 
earning  le  Europ     1  bankers'  sole  and  only  object 

in  endeavrnug  in  the  obtain  supervision  over 

ailway  management  anu  fmance  was  to  see  to  it  that 


2-^6      FOREIGN  FI.VANCIAL  CONTROL  IN  CHINA 

of  H^'h?' V'  '"""^  '''''  "'■^'^  ^"^  ^he  interests 
ot  bondholders  protected.     The  opponents  of  what  are 

now  descnbed  as  'the  Tientsin-Pukow  terms'  declare 
hat  the  way  has  been  deliberately  left  open  for  ruth- 
less squandering  and  peculation  in  railway  funds  It 
'.s  therefore  all  the  more  incumbent  upon  the  railway 
admm,strat,on  to  demonstrate  to  the  world  that  they 
are  capable  of  controlling  their  officials  and  the  funds 
that  are  destined  to  pass  through  their  hands  "  « 

The   Chinese  officials,    however,    did   not    fulfill   the 
expectations  and  trust  placed  in  them.     Mr.   Straight 
•nforms  us   that.-   "from   the  commencement   of  the 
construction  of  this  line  there  have  been  numerous  scan- 
dals, the  most  flagrant  instance  resulting  in  the  degrada- 
t'on  of  the  director  general  and  a  number  of  his  sub- 
ordmates.     The  cost  of  construction  has  far  exceeded 
even  the  most  liberal  estimates,  and  the  loan  service  will 
theref^ore  constitute  a  heavy  charge  on  the  revenues  of 

"  Owing  to  the  unsatisfactory  operation  of  the  so- 
called  T,entsin-Pukow  '  terms."  continues  Mr.  Straight 
negotiations  were  conducted  in  the  winter  of  1908- 
1909  between  the  British.  German  and  French  Groups 
and  the.r  respective  Governments  with  a  view  to  reach- 
ing an  understanding  as  to  the  degree  of  'control '  to 

.'  ?n  'if"  P*'^""  Review."  Vol.  IX.  page  3.6 
See  Straight,  op.  cit.,  page  133. 


INTERNATIONAL  CONTROL  227 

be  demanded  from  China  as  a  condition  precedent  to 
future  loans."    These  negotiations  were  for  a  loan  to 
construct    both    the    Canton-Hankow    and     Hankovv- 
Szechuan  line  or,   as   they   are  called   collectively,   the 
Hukuang  Railways.     At  first  it  was  intended  that  there 
should   be  Anglo-American   c,  operation;  but   America 
refused  to  have  anything  to  do  with  the  project  in  1904. 
Later  on,  in   1905,   France  and  England  came  to  an 
arrangement  with  regard  to  this  line.     Little,  however, 
was  done  until,  in  1908,  the  German  group  insisted  upon 
participation   in   said   enterprise.  •»     Diplomatic   protest 
and  recriminations   followed  owing  to  the  willingness 
of  the  Germans  to  agree  to  "  Tientsm-Pukow  "  terms, 
while  the  British   insisted  upon  more  effective   "  con- 
trol." »»     The  controversies  finally  rcbulted  in  a  com- 
promise under  which  the  British  and  French  associates 
combined    with    the    German    group    to    negotiate    the 
Hukuang  loan  jointly.     The  agreement  was  initialed  on 
the  sixth  day  of  June,   1909,  and  the  "  control  "  pro- 
visions accepted  by  the  banks  were  similar  to  those  em- 
bodied in  the  Tientsin-Pukow  Agreement,  as  we  shall  see 
presently. 

At  this  point  the  United  States  interfered.  The 
American  legation  in  Peking  forwarded  a  protest  to  the 
Grand  Councilor,  Chang  Chih  Tung,  against  the  rati- 

"See  Chapter  II  (72). 

"  See  Straight,  op.  cit..  page  133. 


228 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


ficafon  of  the  preliminary  agreement  on  the  ground 
that  American  financiers  had  secured,  in  1904.  a  promise 
from  the  Chinese  Government  that  in  the  event  of  the 
floatmg  of  foreign  loans  for  the  Hupeh  section  of  the 
Szechuan   road   China   would   consult  first   the  United 
States  and  Great  Britain.-     Inasmuch  as  the  United 
States  had  not  officially  relinquished  her  right  to  partici- 
pation, the  American  Government  now  demanded  admis- 
sion  of  an  American  group  composed  of  Messrs   J    P 
Morgan  and  Co..  Kuhn.  Loeb  and  Co.,  the  First  National 
Bank,  and  The  National  City  Bank,  all  of  New  York 
The  group  was  represented  by  Mr.  Willard  D.  Straight 
Mr.   Knox  supported  his  demand  by  pointing  to  the 
menace  to  foreign  trade  likely  to  ensue  from  the  lack 
of  proper  sympathy  between   the  powers  most  vitally 
interested  in  the  preservation  of  the  principle  of  equality 
of  commercial  opportunity,"  adding  that  "  the  Govern- 
ment   of    the    United    States    regards    rull    and    frank 
cooperation  as  best  calculated  to  maintain  the  open  door 
and  the  integrity  of  China  and  .  .  .  that  the  formation 
of  a  powerful  American,  British.  French  and  German 
financial  group  would  further  that  end."  ^^ 

It  was  last  not  least  due  to  the  personal  interference 
of  President  Taft.-  that  the  Chinese  agreed  to  provide 
for  equal  participation  of  America  in  the  railway  loan, 

"lee  -'SSn  51'?"^'"  '^  (^°'-  5704).  pages  ,44  ff. 

bee     Fore  gn  Relations."  1909  (Vol.  5704).  pajre  it] 
"See  preceding  chapter,  ^     ^^    ^'- 


INTERNATIONAL  CONTROL 


229 


and  that  "  Tripartite  Banks  "  consequently  invited  the 
American  group,  in  May,  1910.  to  join  them  in  the  com- 
bmation  which  they  had  effected  the  year  before.     This 
invitation  was  accepted  and  an   intergroup  agreement 
was  signed  in  November,  1910."     The  final  agreement 
for  the  Hukuang  loan  was  signed  with  China  by  represen- 
tatives of  the  four  nation  syndicate  on  May  20th,  191 1, 
on  which  day  the  preliminary  agreement  of  June,  1909.' 
was  sanctioned  with  the  addition  of  a  few  provisions 
referring  to  American  participation,  and  an  increase  of 
the  amount  to  L6,ooo,ooo.*« 

The   Imperial   Chinese  Government  Five   Per  Cent. 
Hukuang    Railway's    Sinking    Fund    Gold    Loan    of 
L6,ooo,ooo  was  to  the  amount  of  L5oo,ooo  for  the  re- 
demption at  a  premium  of  23^  per  cent,  of  certain  un- 
redeemed   Gold    Bonds    of    the    total    par    value    of 
$2,222,000,  issued  by  the  American  China  Development 
Company  on  behalf  of  the  Chinese  Government,  and  the 
balance  for  the  construction  of  a  government  railway  in 
the  Provinces  of  Hunan.  Hupeh.  and  Szechuan,  com- 
prising two  sections:     i.  The  Hupeh-Hunan  section  of 
the  Canton-Hankow  Railway,  being  a  line  from  Wuchang 
south  through  Yochow  and  Changsha  to  a  point  on  the 

\l  r"  "i^^*"  ^*'**"'"  Review,"  Vol.  XIII.  page  83. 

See  f^so  u'  sV.l    7""'  f  ^*""  ^^^''^^•"  Supplement.  Aug.,  19,,. 
rtl  ^i  r    •■       ^''^  '^  -sular  Reports,  Oct.  ro,  1913.  No.  24V    For 


230     TOREIGN  KINAN-CIAL  CONTROL  IN  CHINA 
southern  boundary  of  Hunan,  there  connecting  with  the 
Kwangtung  se..,„„      This  section  of  a  total  length  of 
900  Wometers  .  under  a  British  engineer  in  chief.     .. 
The  Hupeh  section  of  the  Hanko« -Szechuan  line,  from 
Kwangshu,.    on    tlte    Peking-Hankow    line,    through 
Stangyang  and   Chingmen  to   Ichang,   600  kilometers 
under  a  German  engineer  in  chief,  and  from  Ichang  .0 
Kwetchowfu   in    Szechuan,   300   kilometers   under   an 
Amencan  engineer  in  chief.     The  question  of  control  is 
regulated  tn  Article  XVII :     "  The  construction  and  con- 
trol of  the  railway  lines  shall  1«  entirely  and  exclusively 
vested  ,n  the  Imperial  Chinese  Government.     For  the 
work  of  construction  the  Imperial  Chinese  Government 
w."   .select    for  appointment   a    fully   qualified    British 
Engmeer-,n-Chief  for  the  Hupeh-Hunan  section  of  the 
Canton-Hankow  railway  line  to  Yichangshien,  and  a 
fully    qualified    German    Engineer-in-Chief     for    the 
Kwa..gshui-Ichang   section    of    the    Szechuan-Hankow 
ra.hvay  Ime.  with  a  fully  qualified  American  Engineer. 
m-Ch,ef  for  the  section  of  that  line  from  Ichang  to 
Kwetchowfu.  at  the  same  time  informing  the  Banks  of 
the  .selection  made."     At  Kweichow  the  system  was  ,0 
connect  w.th  the  future  Kweichow-Chungking-Chengtu 
sectton  of  over  500  miles  which  had  been  reserved  for 
rench  capital,  as  no  .,hare  of  the  construction  of  the 
system  provided  for  by  the  Hukuang  agreement  was 


■jm4^^si^-umj- 


INTERNATIONAL  CONTROL  23 1 

allotted  to  the  French  group."     Article  Xv^III  concedes 
to  the  British  and  Chinese  Corporation  and  the  Deutsch- 
As.atische  Bank  the  exclusive  purchasing  rights  for  the 
entire  system,  including  the  American  section,  on  which 
they  are  allowed  a  purchasing  commission  of  five  pei 
cent.     There  is.  however,  a  gentleman's  compact  between 
the  four  groups  of  May  23rd,  1910,  that  fair  play  will 
be  observed  and  that  the  purchasing  agents  will  "  make 
all  proper  provision  for  the  receipt  on  an  absolute  basis 
ot  equality  of  tenders   from  British,  German.  French, 
and  American  manufacturers."  ** 

The  loan  of  six  million  pound  sterling  was  according 
to  Article  IX  secured  in  respect  to  both  principal  and 
interest,  as  a  first  charge  upon  Hupeh  and  Hunan  provin- 
cial salt  and  likin  revenues  and  Hupeh  rice  tax  amount- 
ing to  a  total  of  5,200.000  Haikwan  taels  a  year.     These 
revenues  are  declared  free  from  all  other  loans,  charges 
or  mortgages.     It  is   furthermore  stipulated  that  "so 
long  as  principal  and  interest  of  this  Loan  are  regularly 
paid,  there  shall  be  no  interference  with  these  Provincial 
revenues;  but  if  principal  or  interest  of  the  Loan  be  in 
default  at  due  date,  then,  after  a  reasonable  period  of 
grace,  hkin  and  other  suitable  internal  revenues  of  the 
Provinces  of  Hupeh  and  Hunan  suflBcient  to  provide  the 
^^^'See  Chapter  IV ;  see  also  "Far  Eastern  Review,"  Vol.  9.  page 
»«  See  "  Foreign  Relations,"  1910,  page  283. 


^3-'      l-OKliiON  FIXAXCIAL  CONTROL  IN  CHINA 
an,o„„,s  ,b„,e  stated  shail  forthwith  be  transferred  to 
and  adn„n,stered  by.  the  Imperial  Maritime  Customs  in 
Ihe  mterests  of  the  bondholders." 
Th.  tankers  had  acquiesced  i„  these  lenient  control 

n.e  T,ems,n-r„K.o„  frauds  and  the  surveillance  of  the 
■Nat,«nal  Assembly  over  the  expenditure  of  loan  funds 
as  well  as  the  difficulties  by  which  the  central  govern-' 
nient  was  confronted,  iustilied  them  in  confirming  the 

tZT  ^J""^'"^   °'   "-e   original   agreement."  ■• 
That  the  Chmese,  on  the  other  hand,  were  able  to  s™,re 
T.ents,n-Pul<ow "    terms    in    the    original    Kukuang 
agreement -despite  the  fact  that  more  stringent  Ton 
tro   was  needed -was  due  to  the  rivalry  between  the 
Bm,sh  and  German  groups.    The  international  syndi! 
cate  w-as  furthermore  confronted  by  an  ever  increasing 
n  -loan     ag.ta.ion  in  the  provinces  through  which 
.he  Hukuang  hues  were  to  be  constructed,  which  obliged 
Chang  Ch,h  Tung  -  especially  in  the  face  of  the  opposi- 
on  by  the  N-ational  Assembly _.o  adhere  as  strictly 
a»  P"-I.ie  to  the  tcm,s  of  the  original  contract.     Bu' 
notw,thstanding  the  multitude  of  good  reasons  for  a 
emeu, -control"  the  bankers  should  soon  be  forced  to 
have  the  secunty  revised,  the  arrangements  ior  the  bank- 
ng  o    funds  reconsidered  and  a  change  instituted  with 
regard  to  the  auditors.     It  was  the  Chinese  revolution 

"  See  Straight,  op.  cit.,  page  135. 


WfM 


^*^m-M-'  MM 


I 


INTERNATIONAL  CONTROL  233 

which  necessitated  the  reconsideration  of  several  points 
in  the  agreement.     Says  the  Far  Eastern  Review?^  "  At 
the  time  the  agreement  was  being  negotiated  an  effort 
was  made  to  have  the  railway  lines  to  be  built  pledged  as 
collateral  security,  but  the  authorities  resisted  overtures 
m  this  regard  chiefly  owing  to  the  popular  opposition 
to  placmg  what  are  described  as  '  sovereign  rights  '  in 
the  hands  of  the  foreigners.     The  revolution  produced 
such  changes  in  the  value  of  the  security  already  pledged, 
however,  that  reconsideration  was  necessary.     One  of 
the  first  steps  to  be  taken  by  the  revolutionists  was  to 
declare  the  abolition  of  likin.  and  though  that  was  event- 
ually revised  likin  collections  fell  off  almost  entirely  as 
a  result  of  the  dislocation  of  the  machinery  of  tax  col- 
lection.    Other  revenues  pledged  also  suffered.  ...  The 
Government  protested  that  the  taxes  were  unaffected,  but 
after  much  argument  it  was  agreed  that  the  property 
and  materials  of  the  lines  should  be  specially  given  as  a 
provisional  guarantee  that  the  likin  was  unimpaired." 
In  Article  14  it  was  stipulated  that  certain  funds  should 
be  placed  with  certain  Chinese  banks.     The  credit  of 
all  native  banks  being  seriously  affected  through   the 
revolution  the  Chinese  Government  and  the  representa- 
tives of  the  "  Quadruple  Banks  "  arranged  in  1913  that 
the  loan  funds  should  be  deposited  in  the  Hongkong 
and  Shanghai  Bank,  Deutsch-Asiatische  Bank.  Banque 
»°  "  Far  Eastern  Review,"  Vol.  IX.  page  454. 


234 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


de  1  Indo-Chine.  and  the  International  Banking  Cor- 
poratmn.  instead  of  with  the  native  banks  -  Finally 
Chma  undertook  of  her  own  accord  to  engage  experi- 
enced foreign  accountants  for  the  various  railway  sec- 
tions.  ' 

The  construction  of  the  Hukuang  railways  had  made 
but  httle  progress  owing  to  the  political  and  financial  state 
of  China  during  and   following  the  revolution,   which 
was  unfavorable  to  railway  construction.     The  revolu- 
t.on  has  also  set  a  halt  to  the  issue  of  the  socalled  Cur- 
rency Loan.     On  April   .5th.  1911.  an  agreement  had 
been  s.gned  between  the  President  of  the  Ministry  of 
Fmance  on  behalf  of  China,  with  the  "Four-Power" 
syndicate,  authorizing  the  issue  by  the  foreign  bankers 
of  a  F.ve  Per  Cent.  Sinking  Fund  Gold  Loan  for  an 
aggregate  amount  of  Lio.000.000.     The  issue  price  of 
this  loan  was  to  be  95.  and  of  the  L9.500.000  which  was 
actually  to  be  handed  over  to  the  Chinese  Government 
Li.000,000  was  earmarked  for  the  industrial  develop- 
ment of  Manchuria,  while  L8.500.000  were  to  be  devoted 
to  the  reform  of  a  chaotic  currency  that  had  always  been 
at  the  root  of  China's  financial  troubles."     The  loan 
was  to  be  secured  on  certain  revenues  appertaining  to 
the  three  Manchurian  provinces,  and  on  a  recently  im- 
posed  surtax  upon  salt. 

:see     China  Year  Book."  1912,  y-ivt  288. 


INTERNATIONAL  CONTROL  235 

The  question  of  "con.rol"  should  prove  again  the 
greatest  s,u„,bHng  block  in  the  path  of  negotiations.     To 
'|..o.e    Mr     Straight;"     "Practically    the    only    loans 
prev,ously  falling  "  within  this  category  ("  government  " 
or     a<in„n,s.rat,ve  "  loans)  had  been  required  to  pay 
.nden,n,„es  abroad  and  there  was  no  necessity  therefore 
that  the  lenders  should  exercise  "control"  over  their 
expend,ture.     The  currency  loan,  however,  was  to  carry 
out  a  definite  program  and  not  for  general  administrative 
puri^oses     The  four  banking  groups  now  acting  in  bar- 
mony  beheved  some  form  of  supervision  to  be  necessary, 
nd  ,.  was  thought  that  the  "  control  "  machinery.  devis«^ 
or  radway  loans,  could,  with  certain  modifications  be 
m.l.zed  for  assuring  the  proper  applications  of  the  bor- 
rowed  funds  under  the  currency  reform  program. 

The  Chmese  had  reluctantly  agreed  to  various  con- 
rol  prov,s,ons  in  railway  loan  agreements,  but  they  feared 
that  to  admit  the  principle  of  supervision  over  admin- 
.strative  expenditures  would  be  to  pave  the  way  for 
foreign    con.rol    over    China's    general    finances.     An 
arrangement  was  finally  made,  however,  whereby  China 
submitted  .0  the  groups  her  program  of  currency  reform 
for  the,r  acceptance,  and  agreed  to  expend  the  loan  funds 
only  m  accordance  therewith,  to  publish  quarterly  reports 
■^    disbursements  made,  and  ,0  engage  a  foreign  expert 
to  assist  the  Bureau  of  Currency  Reform. 
"  See  Straight,  op,  cit.,  page  135. 


^36      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

"  The  Loan  has  not  been  issued  but  it  is  open  to  ques- 
tion whether  this  'control.'  in  practice,  would  have  pre- 
vented peculation,  and  insured  the  proper  expenditure 
of  loan  funds,  and  the  effective  operation  of  the  cur- 
rency  reform  program." 
So  much   for  ,he  international  l«.ns  preceding  the 

es.,ma.  ,1  from  .wen.y  .o  seventy  mi„ion  taek."     The 
'"  r'""'""^  »   '^cking  soon  realized  that  the 

possible.     The,r  general  inability  ,o  cope  with  the  situa- 
■on  'o^ether  with  their  loss  of  revenue  fro.  the  rev:  ^ 
provtnces.  capture  of  Govemntent  funds,  and  .he  whole 

IZlt,       """''■  '''"^^  ''-■^■'  «"-« 

»e      therefore  approached  regarding  loans  to  the  in,- 
penal     Government:     a     Baron     Cottu     for     francs 
.50000.000,  certain  American  financiers  for  L,  000000 
on  .he  security  of  the  Pe.ing-Kalgan  Railway.  aTi'tr.' 
Beg,an-Fre„ch  Syndicate  under  Russian  influence    or 

;":*rc;j:::?rd'-^r:"^-'"--' 

Ti,    D      ■        '"^^"''"      Syndicate   for  various  sums 
The  Provtncal  Assemblies  and  Republicans  in  the  South 


'X  m 


INTERNATIONAL  CONTKOI  237 

immediately  raised  an  outcry  against  any  possible  loans, 
hre  tenmg  a  boycott  against  the  nations  furnishing  the 
iunds^     Th.  caused  the  bankers  to  hesitate  and  consult 
-th  thar  Governments  through  their  respective  lega- 
.ons.     The  foreign   legations  in   Peking  were  at  that 
me  ,n  favor  of  the  North.     In  view  of  the  fact  that 
he  Bnt.sh  mterests  predominated  in  China,  the  Powers 
deferred  to  the  wishes  of  Great  Brita.n  in  saying  whether 
the  Manchus  and  Yuan  Shih  Kai  should  receive  f^nan- 
c.a   support  or  not.     And  it  was  "  generally  understood 
that  up  to  th,s  juncture,  the  British  Minister  at  Peking 
S.r  John  Jordan,  fully  agreed  with  his  colleagues  in  that 
Yuan,  as  the  only  man  to  save  the  situation,  should  re- 
ceive  foreign  financial  aid."  "     But  "  to  the   repeated 
recommendations  of  the  legation^  in  support  of  Yuan, 
the  Chancellors  answered  that  as  the  South  was  entirely 
under  Republican  rule,  any  support  to  the  Xorth  would 
result    m    retaliatory    trade    boycotts,    destruction    of 
property,  and  possible  anti-foreign  uprisings,  with  con- 
sequent massacre  of  all  foreigners  in  the  interior      In 
view  o    this,  the  Governments  could  not  >anction  any 
financial  assistance  to  the  other  side,  and  •  hina  would 
have  to  solve   its   internal   problem   unaided  "  =«     The 
neutrality  proclamation  of  the  powers  following  shortlv 
afterwards  sealed  the  doom  of  the  Manchu  Government'. 

i's^  "'l"  I"*'""  ^'^^'''^•"  Vol.  8.  page  34s 
"See     Far  Eastern  Review."  Vol.  8,  page^j. 


238 


FOREir.X  FIXAXCIAL  CONTROL  IN'  CHINA 


the  collapse  of  the.r  loan  negotiations  convincing  them 
of  the  hopelessness  of  their  cause. 

But  the  powers,  in  pursuance  of  their  p-^  y  of  main- 
am.ng  strict  neutrality,   w„uid  not  countenance  loans 
to    the    Revolutionary    Government.     The    latter    was 
therefore  co„,pellecl  to  close  a  chal  with  Japan,  which 
Power  was  ready  to  widen  her  interests  in  China,  and 
accordmgly  prepared    to   si^m    the  agreement    for   the 
hypothecati.w  of  the  properties  of  the  China  Merchants' 
Meam   Navigation   Company.     But.    'When   the  great 
Bnfsh  sh.pp.ng  and  commercial  companies  realized  that 
t  'eir  mterests  were  in  danger  and  the  Republicans  were 
playing   into   the   hands   of  their   formidable  Japanese 
rivals,  who  by  securing  a  lien  on  the  Phina  Merchants' 
propert,es  would  be  masters  of  the  river  and  coastwise 
sh.ppmg  trade,  then  the  law  of     elf-preservation  over- 
shadowed all  other  considerations,  and  the  demand  was 
made  on  the  British  financial  group  to  break  the  dead- 
ock  and  advance  the  funds  to  Sun  Yat-sen.  to  prevent 
the  Ch.na  Merchams'  Steam  Navigation  Company  pass- 
ing mto  the  control  of  the  Japanese.     And  the  British 
group  w.th  the  support  of  its  Government  acted  "  " 

At  that  time  the  Ch.nese  situation  had  been  cleared 

up  cons.derably.     The  Man  ^us  abdicated  on  Feb    12th 

and  the  Chinese  Governme,  t  was  consolidated  under  the 

leadership  of  Yuan  Shih  Kai  with  the  active  support 

"  See  "  Far  Eastern  Review."  Vol.  8.  page  374. 


i;V.Ti 


:4:a^r 


WM^^m 


INTPRNATIONAL  CONTROL 


■239 
from  Sun  Ya-«„  and  ,h.  Scud,.  I.„edia«ly  .here- 
a.«  th.  propo.„,„„  was  mad,  ,0  the  (Quadruple  Syn- 
d.ca.e  ,ha.  .he  embargo  on  £ore,g„  loans  be  rafsed  and 
pemnssion  g,ven  to  advance  iunds  to  the  new  g.vera- 
n.cnt.     To  .hi,  the  syndicate  agreed  and  on   iL    2 

Zt  T^"'  '"'  ^'""'^'  """'<'"«  Corporation! 
act  ng  on  ,«half  of  the  ,uartet.c,  .„ade  an  advance  of 
u.es  ^.oooooo  to  the  Chinese  Governntcn,  a,  Nanking 
-last  not  leas,  stirred  to  action  by  the  british  shipping 
interests,  as  suggested  above. 

The  deadl.«:k  had  been  raised  on  the  previous  day,  i  e 
on  Feb.  .„h.  when  tb-  representatives  of  the  svndicat 
a.  the  ,nv,tat,on  of  Mr   Tang  Shao  Vi.  represenHng  the 
r  pubbcan  govern„,ent,  discussed  w„h  him  the  question 
"f  a  general  Reorganization  Loan.      Vccordin-    ,0  M, 
S..ra,ght  ••  Mr.  Tr,  ,  stated  the  immediate  ,       Ircn-^n.s 
of  the  Chinese  Go>  rnment.  and  requests      : ..  ,.  „. 
sematives  to  ask  the.r  groups  ,0  finance  th.  •  ,r,.'    J„ 
add,t,„n  he  disc,  ssed  the  Chinese  revenues      ..   ,-.'.  .  as 
«^cunty    for  a   large   loan   to    reorganize   the   Chinese 
Adnnr^strauon,  and  to  initiate  a  scheme  .f  commercial 
and  mdustnal  development.     He  asked  the  represe.  „. 
ttves  how  much  China  could  borrow  on  th,s  securitv     nd 
finally    htmself  suggested   the   figure   of  I«o.ooo,ooo 
whtch  he  wtshed  the  bank,  to  loan  in  five  annual  install- 
ments  of  L,2,ooo,ooo  each." »    A,  secun.y  for  the 
»•  Se«  Straight,  op.  cit,  page  157. 


^1 


m^m^:jm^i' 


^40      F'ORr-ir,\  FfXANTIAI.  CON'TROL  IX  CHIXA 

proposed  advances  he  oflfered  to  issue  sterling  treasury 
l)dls.  to  he  secured  as  a  secondary  charge  upon  the  Salt 
(.•abelle.  The  advance  of  taels  2000.000  of  the  follow- 
ing day  was  made  at  Mr.  Tang's  request  to  meet  the 
urgent  re(|uirements  of  the  Xanking  authorities. 

Negotiations  for  further  advances  were  proceeding 
when  the  Peking  m-'tiny.  followed  by  similar  outbreaks 
in  other  parts  of  the  Xorth.  threatened  to  involve  the 
whole  of  the  Xorth  in  anarchy.  It  was  not  until  March 
Jnd  that  the  situation  in  Peking  was  once  more  in  hand, 
and  on  that  day  the  syndicate  was  recpiested  to  make 
further  advances.  To  this  request  the  bankers  agreed, 
making  an  advance  of  taels  1. 100.000  on  March  7th. 
On  March  9th  the  syndicate  received  a  letter  from  the 
President  which  is  of  particular  importance  in  the  light 
of  subsequent  events. 

According  to  this  letter,  it  was  understood  and 
agreed  -"  "  That  the  banks  hold  a  firm  option  for  the 
provision  of  the  further  monthly  requirements  of  the 
Chinese  Government  for  the  months  of  March.  April. 
May.  June  and  possibly  July  and  August,  which  the 
I'\)ur  Groups  have  already  been  re(|uested  to  finance, 
against  the  delivery  of  additional  sterling  Treasuf}' 
Hills  on  terms  to  be  arranged. 

"  That   in   consideration   of   the   assistance   rendered 
by  the  groups  to  China  in  the  present  emergency,  and 
=»  See  "  Giina  Year  Book,"  1913,  page  350. 


F^SS9^^4?VagbiS^2gK««r 


INTERNATIONAL  CONTROL 


241 


of  their  services  in  supporting  her  credit  on  the  foreign 
markets,  the  Chinese  Ciovernment  assures  to  the  groups 
(provided  their  terms  are  equally  advantageous  with 
those  otherwise  obtainable)  the  firm  option  of  under- 
taking the  comprehensive  loan  for  general  reorganiza- 
tion purposes,  already  proposed  to  them,  to  be  floated 
as  soon  as  possible,  and  to  be  applied  in  the  first  instance 
to  the  redemption  of  the  sterling  Treasury  Bills  afore- 
said. ' 

Every  arrangement  had  been  made  by  the  groups  to 
continue  the  payment  of  the  advances  agreed  upon,  when 
on  March  14th  they  received  definite  information  that 
the  Premier  Tang  Shao-^'i  was  negotiating  with  a 
nominally  Belgian  Syndicate  for  an  independent  loan. 
And  despite  the  protests  of  the  Groups,  Premier  T.^ng 
signed  the  loan  on  March  14th,  subject  to  the  confirmation 
of  the  National  .Assembly  at  Xanking.  The  European 
Syndicate  which  undertook  the  loan  consisted  of  tlie 
Eastern  Bank  Ltd.  and  Messrs.  J.  Henry  Schrckier  and 
Co.,  both  of  London.  Messrs.  A.  Spitzer  and  Co..  Paris. 
The  Russo-.\siatic  Bank  and  a  Belgian  Group  com- 
posed of  La  Societe  Generale  de  Belgi(|ue,  La  Banque 
Sino-Belge.  and  La  Societe  Beige  de  Chemins  de  Fer 
en  Chine.  The  agreement  provided  for  a  loan  of 
Li. 000.000  at  five  per  cent.,  issued  at  97  (ninety-seven) 
and  redeemable  in  12  months,  to  be  followed  subse- 
quently by  a  larger  loan,  amounting  in  all  to  Lio.000.000. 


242      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 
It  was  according  to  Article  LV  secured  upon  the  general 
revenues  and  specifically  upon  the  property  and  revenue 
of  the  Peking-Kalgan  Railway. ••«>     "  The  Chinese  Gov- 
ernment shall  deposit  with  the  Bank,  Government  Treas- 
ury Bills  for  one  million  pounds  sterling  in  amounts  of 
ten  thousand  pounds  each.     The  Bills  shall  be  secured 
by  the  general  revenue  of  the  State,  and  the  pavment  of 
the  principal  and  interest  is  further  secured  by  a  first 
mortgage  on  the  net  income  and  property  of  the  Peking- 
Kalgan  railway."     The  article  of  greatest  significance 
is  Xo.  15 :     "  In  consideration  of  the  financial  assistance 
given  by  the  Bank  (Banque  Sino-Belge)  to  the  Govern- 
ment  under  this  agreement,   the   Government   engages 
to  give  a  preference  to  the  Bank  for  such  loan  or  loans 
(future  Joans)  until  an  aggregate  amount  of  ten  million 
pounds  sterling  shall  have  been  floated  through  the  Bank 
provided  the  terms  ofifered  are  equally  advantageous  to 
those  ofifered  by  other  parties." 

A  comparison  of  these  terms,  signed  on  March  14th 
with  the  terms  of  the  agreement  signed  by  President 
Yuan  on  Mardi  9th.  reveals  a  concession  of  preferential 
rights  to  both  parties,  or  in  other  words  a  breach  of 
the  earlier  contract.  According  to  the  Far  Eastern 
Rc7Hi-u'  this  would  indicate:  "that  the  new  rulers  of 
China  adhered  to  the  traditional  tactics  of  plaving  one 
group  ag.^nst  the  other  in  the  hope  that  by  such  com- 
»«  See  "  China  Year  Book."  1913.  page  351. 


INTERNATIONAL  CONTROL 


243 


petition  China  would  free  herself  from  any  foreign 
monopoly  or  control  of  her  finances."  ^i  The  premier 
himself  gave  for  an  explanation  that  he  was  forced  to 

arrange   the   Belgian   loan   because   of   an  —  alleged 

refusal  of  the  Quadruple  Syndicate  to  make  the  advances 
he  required.3^  But  the  only  true  justification  for  China's 
action  is  to  be  found  in  the  fact  that  the  price  paid  by 
the  bankers  for  the  Belgian  loan  was  lower  than  that 
which  the  four  groups  were  ready  to  give. 

In  addition  to  the  breach  of  faith  the  pledging  of  the 
revenues  and  property  of  the  Peking-Kalgan  Railway 
was  regarded  by  the  four  governments  concerned  as  a 
violation  of  the  Anglo-French  Peking-Hankow  Railway 
Redemption  Loan  of  igcH  and  of  the  engagement  entered 
into  by  Great  Britain  and  Chma  in  1902  that  the  Peking- 
Kalgan  Railway  should  not  be  mortgaged  for  a  foreign 
loan." 

It  must  be  remarked,  in  this  connection,  that  there  is 
every  reason  to  believe  that  the  loan,  although  termed 
a  Belgian  one,  was  in  fact  a  Russian  affair,  for  the 
syndicate  is  identical  with  that  formed  by  Russia  for 
participation  in  the  "  Six-Power  Syndicate."  The  pos- 
sible political  character  of  this  loan  is,  according  to  the 
Far  Eastern  Reznew,  made  clear  when  it  is  remembered 
that  Russia  had   for  years  endeavored  to  gain  control 

»»  See  "  Far  Eastern  Review,"  Vol.  S,  page  378. 
*'  See  "  China  Year  Book,"  1913,  page  353. 
»»  See  "  China  Year  Book,"  1913,  page  353. 


244      FOKKIGX  FIXANCIAL  CONTROL  IN  CHINA 

of  a  railway  across  Mongolia  and  through  the  Kalgan 
i  ass  to  the  capital/'* 

Inirthermore.  the  signature  of  the  Belgian  loan,  as 
Mr.  Straight  remarks.  "  afifected  the  security  for  the 
large  loan  which  the  groups  had  been  asked  to  under- 
take -  and  it  carried  no  guarantee  whatsoever  that  the 
funds  furnished  or  to  he  furnished  would  be  properlv 
expended,  it  increased  China's  liabilities  without  insuring 
any  increase  in  the  effectiveness  of  her  administration 
and  instead  of  rehabilitating,  it  was  calculated  to  prej- 
udice her  credit."  ^^ 

For    all    these    reasons    the    Four-Power    Syndicate 
■"'mediately  suspended  further  payments,  and  refused  to 
comply  with  their  side  of  the  agreement  unless  the  so- 
called  "  Belgian  -  loan  was  canceled.     In  their  protest 
against  this  loan  and  their  demand  for  its  cancellation 
>l'e  bankers  found  the  active  support  of  their  respective 
governments  under  the  leadership  of  Great  Britain      The 
London  1-^oreign  Office  had  put  itself  on  record  as  opposed 
to  any  loan  coming  from  .sources  other  than  the  Quad- 
ruple Syndicate,  when  it  refused  its  support  to  the  British 
Banks  which  had  taken  an  interest  in  the  Belgian  loan 
On  March  ,4.  ,he  J.'oreign  Office  assured  the  Hongkong 
and  Shanghai  Bank  of  us  exclusive  support  during  the 
loan    negotiations,    when    requested    to    do    so    by    said 

Sfc  Str..,j,'ht.  op.  dt..  page  140. 


INTERXATIOXAL  COXTROL 


245 


Bank.'"'  The  justification  of  the  Foreign  Office  for  this 
support  was  that  any  other  loan  "  might  interfere  with 
the  temporary  arrangements  made  for  financing  the 
Chine  f'  Provisional  Govenmient,  or  .  .  .  might  con- 
flict with  the  terms  or  weaken  the  security  of  the  large 
loan  for  reorganization  purposes,  which  your  bank  and 
the  allied  French.  (German,  and  American  groups  are 
negotiating,  with  the  full  knowledge  of  their  Govern- 
ments." The  Foreign  Office  likewise  recognizes  "  that 
they  are  under  obligation  not  only  to  the  Hongkong  and 
Shanghai  Bank,  but  also  to  the  governments  and  groups 
concerned  in  these  advances,  not  to  give  their  support 
to  any  other  group  in  negotiating  with  the  Chinese  Gov- 
ernment any  loan  as  described  above  until  the  large  loan 
out  of  which  these  advances  and  the  expenses  of  re- 
organization are  to  be  covered  has  been  successfully 
negotiated,  and,  above  all,  until  the  security  on  which  it 
is  to  be  issued  has  l)een  definitely  settled." 

The  standpoint  of  the  English  Foreign  Office  is  also 
expressed  in  the  following  dispatch :  "  His  Majesty's 
Government  and  the  other  governments  concerned  have, 
from  the  experience  of  past  years,  come  to  the  unanimous 
conclusion  that,  both  in  the  interests  of  their  own  finan- 
ciers and  investing  public,  and  also  as  a  safeguard  of 
China's  credit,  it  is  incumbent  on  them  to  prevent,  as  far 

«"Sce  British  Blue  Books,  "China."  No.  2,  I9i_>.  Vol    CXXI    No 

I,  IT.  '        ■ 


m 


if 


h 


"s 


246 


FOREIGN  FINANCIAL  CONTROL  IN  CHINA 


as  hes  ,n  their  power,  all  possibility  of  a  return  to  the 
former  dangerous  policy  of  unprofitable  international 
compcftion  in  China,  which  only  enabled  the  Chinese 
Government  to  obtain  money  without  adequate  guaran- 
tees, and  rendered  it  impossible  for  the  governments  in- 
terested to  exercise  the  necessary  control  over  the  terms 
of  any  loans.  There  can  be  no  doubt  that  the  inter- 
nat,onahzation  of  future  loans  would  go  far  to  secure 
this  desirable  enJ.''^^ 

To  enforce  the  broadest  possible  internationalization 
of  Chinese  loans,  the  syndicate  decided  at  this  time  to 
strengthen  its  position  by  inv.Jng  the  cooperation  of 
Russian  and  Japanese  financiers.     By  this  step  it  was 
hoped  to  secure  the  absolute  unanimity  among  the  six 
Powers  possessing  the  most  substantial  interests  in  China 
to  prevent  the  entrance  of  unscrupulous  financiers  and 
the  dissipation,  by  reckless  and  unchecked  borrowing 
of    the    nation's    tangible    securities.     Japan    at    once 
accepted  the  invitation  and  designated  the  Yokohama 
Specie  Bank  as  the  official  institution  through  which  her 
share  of  the  loans  would  be  negotiated.     After  a  long 
hesitation.  Russia  also  signified  her  willingness  to  enter 
the  combination.  "  although  it  has  been  quite  apparent 
that  she  desired  to  play  a  lone  hand  and  push  her  advan- 
tage through  the  medium  of  the  Belgo-Russian  financial 
»^Sce  "China,"  No.  2.  igta.  Vol.  CXXI.  No.  7. 


INTERNATIONAL  CONTROL  247 

syndicate."  »«  Russian  interests  were  to  be  represented 
by  the  Russo-Asiatic  Bank  in  cooperation  with  the  same 
syndicate  as  had  undertaken  the  "  Belgian  "  loan. 

The  "Belgian"  loan  had  meanwhile  been  canceled 
upon  the  strong  representations  by  the  foreign  ministers, 
and  the  negotiations  between  the  bankers  and  Mr.  Tang 
were  resumed  on  May  3rd.  The  question  of  control 
arose  immediately.  To  appreciate  the  difficulties  the 
bankers  were  obliged  to  take  into  consideration,  we  shall 
avail  ourselves  of  a  summary  of  the  situation  existing 
at  this  time,  as  given  by  Mr.  Straight."* 

"  They  (the  six  groups)  had  been  requested  by  China 
to  furnish  roughly  10.000.000  taels  or  1.1,300,000  a 
month  for  six  months  and  to  provide  other  sums,  mak- 
ing the  aggregate  amount  to  be  advanced  80,000,000 
taels  or  about  L  10,000,000. 

"  It  would  have  been  impossible  to  issue  a  Chinese 
loan  at  this  time  except  at  a  figure  so  low  as  to  prejudice 
the  quotations  for  Chinese  bonds  already  on  the  market, 
in  the  hands  of  the  public  not  of  the  groups.  To  fur- 
nish the  sums  immediately  required  therefore  the  hanks 
would  have  been  obliged  to  discount  treasury  bills,  which 
they  would  have  either  had  to  hold  themselves,  or  dis- 
pose of  to  a  very  limited  ciientelc. 

II  cf  •"  r^'  '-*'*""  J^'^^ '■«:*•"  Vol.  VIII,  page  381. 
"  Straight,  op.  cit.,  pages  142  ff. 


4 


-'I<^       l()Ni;i(i\   FIXAXCIAI.  CONTROL  I\  rHIXA 

The^e  advances  were  reriuired  to  pay  the  army,  to 
finance  the  disliandment  of  stiperfluous  troops,  and  to 
meet    the   cnirent    expenses    of    the   jjovcrnment.     The 
larjjc  loan  was  to  he  expended  to  redeem  the  treasury 
I'ills.  to  dear  otT  arrears  in  China's  indemnity  and  loan 
servit  s.  and  to  meet  certain  pressing  outstanding  oI)h"- 
gations.     Mr.  Tang  i)roposed  to  use  the  halance  to  make 
ui)  the  loss  of  hkin.  which  he  desired  immediately  to 
abolish,  pending  the  consent  of  the  powers  to  an  increase 
in  the  customs  tariff.     In  addition  he  had  certain  vague 
schemes  for  railway  construction,  afiforestation.  and  the 
estahlishment  of  mills  of  various  sorts. 

"  I'or  the  advances  and  large  loan  requested  the 
Chinese  Covenmient  proposed  to  pledge  the  Salt  Gabelle 
as  security.  The  service  of  the  lloxer  Indemnity  is  i 
first  charge  on  this  revenue.  It  was  estimated,  how- 
ever, that  it  now  yields  taels  47,ocx>.ooo  per  annum  and 
could  be  increased  to  at  least  half  as  much  again  if 
honestly  collected. 

"  I  he  Chinese  Government  at  this  time  was  power- 
less to  collect  the  taxes  which  it  ofTered  as  security  and 
was  unable  to  meet  its  indemnity  and  Ixm  payments,  to 
pay  troops  or  to  finance  its  current  administrative  ex- 
penses and  its  pennanence  was  by  no  means  assured 

"During  the  ccnirse  of  the  negotiations,  from  Feb- 
ruary to  June,  the  Chinese  officials  had  shown  little 
appreciation  of  the  magnitude  of  their  financial  task  and 


IXTERXATIUXAL  COXTROI. 


249 


had 


-•vinccd  little  ability  in  dealing  effectively  therewith. 


Ihc 


ced 


-nnips  nevertheless  had  advanced  r_Moo.o<Ki 
taels  in  order  to  enable  the  administration  to  meet  its 
most  urgent  needs  and  to  prevent  the  disorders  and 
mutinies  which  it  was  feared  would  occur  mdess  funds, 
which  the  Government  could  not  secure  from  its  own 
people,   were  obtained. 

*'  These  advances  had  bee.i  made  subject  to  certain 
conditions  to  insure  their  proper  application  to  the  pur- 
poses for  which  they  were  Ix.rrowed.  yet  the  Chinese 
officials  charged  with  their  expenditure  had  placed  every 
obstacle  in  the  way  of  a  proper  and  efficient  audit,  to 
which  the}-  had  agreed. 

"Patriotic  Chinese,  proud  of  their  Republic  and 
hopeful  and  vonfident  >.f  its  future,  may  regret  the  neces- 
sity of  including  such  ^ncts  in  this  statement.  These 
men.  however,  if  they  i.e  fair  mmded.  must  admit  that 
the  !)anking  groups,  no  matter  how  friendly  they  might 
lie  to  China,  would  not  have  iKcn  warrantee!  in  disregard- 
ing them. 

"  F^ecause  of  these  facts  the  groups  were  unwilling  to 
undertake  the  business  without  n.e  joint  support  of  their 
respective  governments.  Because  of  these  facts,  more- 
oxer,  they  deemed  it  possible  to  proceed  with  acivances 
and  to  undertake  the  reorganization  loan  only  on  cer- 
tain conditions,  which  were  briefly  a.  follows : 

"  I.  That  the  groups  shotdd  have  the  right  to  satisfy 


■f 
*■ 


250      FORFIGN  FINANCIAL  CONTROL  IN  CHINA 

themselves  as  to  purposes    lur  which   funds   were  re- 
q.'.ired. 

"  2.  That  China  should  herself  creaio  a  system  of  audit 
in  which  foreigners  should  be  employed  with  cowers 
not  merely  advisory,  but  also  executive  su  as  to  ensure 
the  effective  expenditure  of  loan  funds  borrowed  for 
the  purposes  specified. 

"  3.  That  the  salt  taxes  to  W-  hyptnhecated  for  the 
service  of  this  loan  should  be  admmistered  either  by  the 
existing  Maritime  Customs  organization  or  by  a  separate 
Chinese  service  like  the  customs,  however,  under  foreign 
direction,  thus  safeguarding  the  proper  administration 
of  the  security  despite  the  possible  continuation  or  re- 
currence of  unsettled  conditions  in  China. 

"  4.  That  the  groups  should  take  the  first  series  of  the 
loan  of  L6o,ooo,ooo,  at  a  fixed  price,  and  be  assured 
an  option  on  the  subsequent  series  at  a  price  to  be  based 
on  the  market  quotation  of  the  first  issue,  thus  giv- 
ing China  the  benefit  of  any  improvement  in  her 
credit. 

"  5.  That  to  protect  the  quotation  of  bonds  issued  and 
to  assure  a  successful  marketing  of  subsequent  series 
China  should  not  borrow  through  other  groups  until 
the  entire  loan  of  L6o,ooo,ooo  had  been  issued. 

"  6.  That  for  a  period  of  five  years  China  should  ap- 
point the  groups  financial  agents  to  assist  the  adminis- 
tration in  its  work  of  reorganization. 


AM 


INTERNATIONAL  CONTROL  251 

"  These  conditions  were  submitted  to  the  Chinese  Gov- 
ernment and  in  reply  the  proup  representatives  in  Peking 
ore  informed  that  it  would  I)e  impossible  tc  China  to 
accept  a  loan  on  such  terms.  Negotiations,  however, 
though  interrupted,  were  not  formally  broken  off,  and 
from  the  end  of  June  discussions  were  continued  between 
the  Chinese  officials  and  the  group  representatives,  but 
without  result. 

"The  difficulty  was  not  a  question  of  the  price  at 
which  the  hankers  should  take  the  bonds.  It  was  the 
question  of  'control.'  The  Chinese  particularly  ob- 
jected to  placing  the  Salt  Gabelle  under  the  Maritime 
Customs,  or  any  foreign  directed  service,  and  to  the  crea- 
tion of  a  proper  audit  department  to  appointing  the 
groups  financial  agents." 

The  strongest  opposition  came  from  the  Chinese  Gov- 
ernment itself.  The  premier  declined  to  entertain  any 
proposal  for  effective  supervision,  and  hinted  that  in  the 
event  of  the  bankers  pressing  their  proposals,  he  would 
suspend  negotiations  and  endeavor  to  raise  money  by 
means  of  a  poll-tax,  or  some  similar  method.  At  secret 
sessions  of  the  National  Council  it  appeared  that  the 
council  was  also  strongly  opposed  to  any  form  of  foreign 
control,  and  this  feeling  was  reflected  in  the  provinces, 
where  a  popular  clamor  was  voiced  against  any  semblance 
of  foreign  control.  Dr.  Sun  Yat-sen  and  General  Huan 
Hsing  both  declared  against  foreign  supervision. 


t 


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'X*iaW.,Vli'i,.VKK<.'.-  Ml...  ■^gr?!!!"W!gr^l^^ 


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lANSI  and  ISO  TEST  CHART  No    2i 


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.^S  (716)   AS2  -  0300  -  Pnone 

^aS  (  '*6>    :S8  -  5989   ■   fa* 


252 


FOREIG.N  FIXAXCIAL  CONTROL  IX  CHINA 


On  June  i8.  the  Shanghai  Chinese  Chamber  of  Coin- 
rnerce   took   the   novel    step  of   requesting  the   British 
Al.n.ster  of  Foreign  Afifairs  to  persuade  the  syndicate 
to  modify  the  more  stringent  terms  of  the  proposed  loan 
Sir  Edward   Grey's  reply,  communicated  through  His 
Majesty's  Minister  at  Peking,  was  as  follows :  *«     "  Sir 
Edward  Grey  has  authorized  me  to  inform  the  Chamber 
of  Commerce  in  reply  that  so  far  the  action  of  the  groups 
has  met  with  the  entire  approval  of  His  Majesty's  Gov- 
ernment.  who.  however,  cannot  urge  the  Banks  to  make 
any  loan  which  does  not.  in  their  opinion,  offer  adequate 
guarantees  for  the  proper  and  useful  expenditure  of  the 
proceeds  and  satisfactory  security   for  the  payment  of 
principal  and  interest:  and   further,  that  in  regard  to 
all   questions  connected   with   this   loan   His   Majesty's 
Government  is  acting,  and  will  continue  to  act.  in  full 
accord  with  the  other  governments  concerned." 

The   protraction    of   the    loan   negotiations    had    the 
result  that  several  provinces,  being  in  desperate  financial 
straits,     negotiated     independent     loans     with     certain 
foreign  commercial  houses,  as  for  instance,  the  firms  of 
Skoda.   Diederichsen.   and   Krupp.   in   return   for  large 
contracts    for   arms    and    ammunition.     Various    other 
expedients   were  adopted   by   the   Central   Government 
all  of  which  while  relieving  a  temporary  necessity  merely 
increased  the  difficulties  of  an  already  almost  hopeless 
^"See  "China  Vear  Book,"  19,3.  page  35/. 


INTERNATIONAL  CONTROL  253 

imancial    problem.     Finally    the    Chinese    Minister    of 
iMnance  decided  to  negotiate  with  the  representatives  of 
an   independent   British   Syndicate,    which   appeared  at 
hat  t.me  on  the  Chinese  financial  market,  for  a  larger 
loan  of  Lio,ooo,ooo.     On  July  i.^th  a  preliminary  agree- 
ment and  on  August  30th  the  final  contract   for  wh  u 
became  known  as  the  Crisp  loan  was  signed  in  T.ondon 
1  he  contract  contained  among  others  the  following  pro- 
visions  :•♦*  ^  * 

"Article  IV.     The  payments  of  interest  and  the  re- 
payments  of  the  principal  of   the   loan  and   all   other 
amounts  required  for  or  incident  to  the  service  of  the 
loan  shall  be  and  hereby  are  constituted  a  first  charge 
on  the  surplus  revenues  of  the  Salt  Gabelle,  the  tot.l 
annual  revenue  of  which  amounts  to  Forty-seven  Million 
iMve  Hundred  and    Ten  Thousand   Kuping  Tads    of 
which  Twenty-four  Million  Taels  per  annum  are  already 
hypothecated.     The  remaining  Salt  Revenue  is  hereby 
declared  to  be   free   from  all  loans,   liens,  charges    or 
mortgages.  ' 

"  Article  VII.  The  price  of  the  bonds  to  the  Chinese 
Government  shall  be  eighty-nine  per  cent,  of  their 
nominal  value. 

"Article  IX.  The  rate  of  interest  for  the  loan  shall 
he  five  per  cent,  gold  per  annum  on  the  nominal  prin- 
cipal  7  he  term  of  this  loan  and  of  the  bonds  evi- 

^'  See  "China  Year  Book,"  1913,  page  360. 


1^ 


t 
I 


254      FOREIGN  FINAXCIAL  CONTROL  IN  CHINA 

dencing  the  same  shall  be  forty  years  from  the  date  issue 
of  the  loan  to  the  public. 

"  Article  XIV.  The  Chinese  Government  engages  not 
to  issue  nor  to  authorize  the  issue  of  anv  other  external 
loan  until  the  whole  of  this  loan  has  been  issued  to  the 
public  ...  but  if  the  Chinese  Government  should 
desire  to  obtain  further  foreign  capital  before  this  loan 
JS  realized,  and  the  terms  offered  by  the  Financial  Group 
are  as  favorable  as  those  offered  by  others,  preference 
shall  be  given  to  the  Financial  Group." 

This  latter  article  and  the  hypothecation  of  the  surplus 
revenues  of  the  Salt  Gabelle  as  well  as  the  absence  of 
any  effective  control  provisions  were  considered  highly 
detrimental  to  the  interests  not  only  of  the  Sextuple 
Syndicate  but  also  of  the  Chinese  Government.     There- 
fore, as  soon  as  the  conclusion  of  this  agreement  became 
known  the  Sextuple  Group  refused  to  comply  with  the 
request  of  the  minister  of  finance  for  further  advances, 
while  the  British  minister  at  once  informed  the  Chinese 
Government   that  his  government  did  not  approve  of 
the  new  loan  and  warned  China  that  her  policy  was 
liable  to  alienate  the  powers  principally   interested  in 
her  finances.     The  British  Foreign  Office  had  previously 
been  approached  by  Mr.  Crisp  with  the  view  of  solicit- 
mg  the  British  Government's  support  in  his  proposed 
loan.     The  Foreign  Office's  refusal  and  attitude  is  ex- 
plained in  a  telegram  from  Sir  Edward  Grey  to  Sir  J. 


m  V 


IXTERXATIONAL  CONTROL  255 

Jordan  of  August  23rd:*'    "  It  was  explained  to  Mr 
Cr.sp  that,  as  a  matter  of  general  principle,  His  Majesty's 
Government   would    never   support    a   loan   concludr.' 
without   adequate  guarantees    for   the   control   of   the 
expenditure  of  the  proceeds  and  without  proper  security 
.   The  fact  that  the  Six  Power  Consortium,  with  the  full 
support  of  the  respective  governments,  had  so  far  been 
unable  to  obtain  satisfactory  terms  in  these  respects  from 
the  Chmese  Government,  rendered  it  very  improbable 
that  a  syndicate  without  the  same  experience  and  un- 
supported by  any  foreign  government  could  meet  with 
a  greater  success." 

After  the  refusal  of  the  international  syndicate   to 
make  the  advances  requested  the  Chinese  Government 
deeded  to  avail  itself  of  at  least  half  of  the  sum  offered 
by  Mr.  Crisp  and  L5,ooo,ooo  were  issued  in  London 
shortly  afterward.     But  the  Chinese  minister  of  finance 
made  it  at  the  same  time  understood  "  that  China  desired 
to  deal  with  the  six  groups  as  the  only  combination 
capable  of   furnishing  within  the  next   few  years  the 
enormous  sums  which  China  would  need  to  reorganize 
her  administration  and  finance  the  industrial  develop- 
ment upon  which  the  Peking  Government  wished  to  em- 
bark.""    For    this    reason,    the    Chinese   Government 
finally  induced  Mr.  Crisp  to  agree  to  the  cancellation 

« Iff  c?'-"ul"  ^°-  ?•  '^"'  Vol-  CXXI,  No.  22. 
"  See  Straight,  op.  cit.,  page  147. 


256      FOREIGN  FINAXCIAL  CONTROL  IN  CHINA 

of  Article  XIV,  as  demanded  by  the  Group,  and  of  the 
flotation  of  the  second  half  of  his  loan  in  return  for 
Li 50,000  compensation.^* 

The  international   loan  negotiations  were  continued 
and  an  early  signature  of  the  Reorganization  Loan  agree- 
ment was  expected  on  all  sides,  when,  early  in  19 13  new 
obstacles  arose,  which   again  threatened  to  wreck  the 
negotiations.     The  source  of  the  difficulty  was  this  time 
certain  Foreign  Powers  who,  actuated  by  selfish  motives, 
and  in  a  highly  discreditable  manner  began  to  scramble 
about  the  appointment  of  Foreign  Adviser.     It  had  been 
understood  that  China  intended  to  nominate  a  Dane  to 
the  position  of  Chief  Inspector  of  the  Salt  Administra- 
tion and  that  a  German  would  be  nominated  Director 
of  the  National  Loans  Department.     The  only  appoint- 
ment about  which  there  was  any  uncertainty  was  that 
of  the  Adviser  to  the  Accounts  and  Audit  Department." 
But  when  the  list  of  names  was  submitted  to  the  Foreign 
Legations,  the  French  and  Russian  legations  formally 
objected  to  a  scheme  whu'   included  advisers  of  neutral 
nationality  as  well  as  a  German.     A  suggestion  then  was 
made  that  two  advisers  of  Russian  and  French  nation- 
ality respectively  be  appointed   for  the  Audit  Bureau, 
the  American  and  Japanese  ministers  disclaiming  any 
ambitions  for  advise  rship. 

\*  l^^  I  S^"^  .^^"  ^°'''*'"  '9'4.  page  379- 
*"  bee     China  Year  Book,"  1914,  page  381. 


W    «• 


INTERNATIONAL  CONTROL  257 

The  decision  to  make  nationality  the  chief  qualifica- 
tion for  the  adviserships  was  open  to  many  objections 
from  the  Chinese  point  of  view,  particular  exception 
being  taken  to  the  appointment  of  a  Russian  at  a  time 
when  diplomatic  relations  were  so  seriously  stiained  by 
the  Mongolian  situation.  Matters  were  therefore  again 
brought  to  a  complete  deadlock. 

It  was  during  this  deadlock  that  President  Wilson,  in 
a  reply  to  a  communication  from  the  American  group, 
announced  that  the  administration  had  refused  the   -e- 
quest  of  the  group  to  sanction  Ameri'-an  participation 
in  the  loan.     The  eventual  resumpt  ...  ,.f  serious  nego- 
tiations with  what  had  then  becrme  the  Quintuple  Syn- 
dicate was  F  obably  due  in  no  small  measure  to  the  fact 
that  it  was  brought  to  the  attention  of  the  Chinese  Gov- 
ernment that  under  an  old  loan  contract  the  Russian  Gov- 
ernment could  claim  the  appointment  of  an  adviser  as  a 
treaty  right."     China  ultimately  agreed  to  appoint  the 
foreign  advisers  as  proposed  by  the  foreign  minister, 
while  the  banks  on  their  part  agreed  to  rearrange  the 
price  of  the  loan  and  to  reduce  the  rate  of  interest  from 
5^  to  5  per  cent. 

The    Reorganization    Loan    Agreement    was    finally 

signed  at  Peking  on  the  twenty-sixth  day  of  April,  1913, 

between  the  government  of  the  Republic  of  China  of 

the  one  part,  and  the  Hongkong  and  Shanghai  Banking 

"  See  "  China  Year  Book,"  1914.  page  383. 


i 


(..   «WfV"» 


258      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

Corporation,  The  Deutsch-Asiatische  Bank,  The  Banque 
de    rindo-Chine,    The    Russo-Asiatic    Bank,    and    The 
Yokohama    Specie    Bank    of    the    other    part.*^     The 
amount  was  25,000,000  pounds  sterling  at  5  per  cent, 
per  annum.     "  In  reimbursement  of  expenses  connected 
with  the  payment  of  interest  and  with  the  repayment 
of  principal  of  the  loan  the  Banks  are  hereby  granted 
by  the  Chinese  Government  a  Commission  of  one-fourth 
per  cent,   on   the  annual  loan   service."     (Article  X.) 
"  The  price  of  this  present  loan  or  of  any  series  thereof 
to  the  Ch  nese  Government  shall  be  the  price  of  its  issue 
to  the  public  on  the  London  market  less  a  deduction  by 
the  Banks  of  six  per  cent,  of  the  nominal  value  of  the 
bonds,  the  issue  price  in  London  to  be  not  less  than  ninety 
per  cent.,  securing  to  China  a  net  price  of  not  less  than 
eighty- four  per  cent,   for  the  entire  loan.     The  Banks 
shall  be  responsible  for  all  expenses  connected  with  the 
issue  of  the  loan."     ( Article  XIH. )     "  The  term  of  the 
loan     shall     be  •      ^ven     years."     (Article     IX.) 

According  to  A..  .v.'__"This  entire  loan,  together 
with  any  advances  v-hich  may  be  made  in  connection 
therewith,  is  hereby  secured  in  respect  to  both  principal 
and  interest  by  a  charge  upon  the  entire  revenues  of  the 
Salt  Administration  of  China,  subject  to  previous  loans 
and  obligations  already  charged  on  the  security  thereof 
and  not  yet  redeemed,  as  detailed  in  the  statement 
♦'  For  text  see  "  China  Year  Book."  1914,  pages  387  (7. 


INTERNATIONAL  CONTROL  259 

attached  to  this  Agreement,  and  it  shall  have  priority 
both  as  regards  principal  and  interest  over  all  future 
loans,  charges  and  mortgages  charged  upon  the  above- 
mentioned  revenues  so  long  as  this  loan  or  any  part 
thereof  shall  be  unredeemed.     No  loan,  charge  or  mort- 
gage shall  be  raised  or  created  which  shall  take  preced- 
ence of  or  bt  on  an  equality  with  this  loan,  or  which 
shall  in  any  manner  lessen  or  impair  its  security  over 
the  said  revenues  of  the  Salt  Administration  of  China, 
so  far  as  required  for  the  annual  service  of  this  loan, 
and  any  future  loan,  charge  or  mortgage  shall  be  made 
subject  to  this  loan,  and  it  shall  be  so  expressed  in  every 
agreement  for  any  such  future  loan,  charge  or  mort- 
gage." 

International    "control"   is   established   through   the 
following  provisions :     "  Article  V.—  The  Chinese  Gov- 
ernment engages  to  take  immediate  steps   for  the  re- 
organization with  the  assistance  of   foreigners  of  the 
system    of   collection   of   the   salt   revenues   of   China 
assigned  as  security  for  this  loan,  in  the  manner  which 
has  been  determined  upon  by  the  Ministry  of  Finance 
and  which  is  as  follows:  — The  Chinese  Government 
will  establish  a  Central  Salt  Administration  at  Peking, 
under  the  control  of  the  Minister  of  Finance.     This 
Central    Salt    Administration    will    comprise    a    Chief 
Inspectorate  of  Salt  Revenues  under  a  Chinese  Chief 
Inspector  and  a  foreign  Associate  Chief  Inspector,  who 


< 


1    ;  ■ 


26o      FOREIGN  FL\AXCIAL  CONTROL  IN  CHINA 

will  constitute  the  chief  authority  for  the  superintendence 
of  the  issue  of  licenses  and  the  compilation  of  reports 
and  returns  of  revenues.  In  each  salt  producing  district 
there  will  be  a  branch  office  of  the  Chief  Inspectorate, 
under  one  Chinese  and  one  foreign  district  inspector 
who  shall  be  jointly  responsible  for  the  collection  and 
deposit  of  the  salt  revenues.  The  engagement  and  dis- 
missal of  these  Chinese  and  foreign  district  inspectors, 
and  of  the  necessary  Chinese  and  foreign  staff  at  the 
chief  and  branch  inspectorates,  will  be  decided  jointly 
I)y  the  Chinese  and  foreign  chief  inspectors,  with  the 
approval  of  the  Minister  of  Finance.  .  ,  . 

"  Release  of  salt  against  payment  of  dues  in  any  dis- 
trict will  be  made  only  under  joint  signature  of  the 
Chinese  and  foreign  district  inspectors,  the  revenues  so 
collected  to  be  lodged  by  them  in  a  'Chinese  Govern- 
ment Salt  Revenue  Account '  with  the  banks  or  with 
depositories  approved  by  the  banks,  and  reported  to  the 
Chief  Inspectorate  for  comparison  with  their  returns. 
This  Salt  Revenue  Account  shall  be  drawn  upon  only 
under  the  joint  signatures  of  the  Chief  Inspectors,  whose 
duty  it  will  be  to  protect  the  priority  of  the  several  obli- 
gations secured  upon  the  salt  revenues. 

"  So  long  as  the  interest  and  principal  of  this  loan 
are  regularly  paid  there  shall  be  no  interference  with 
the  Salt  Administration  as  herein  p>  jvided,  but  if  interest 
and/or  principal  be  in  default  at  due  date,  then  after 


INTERNATIONAL  CONTROL  261 

a  reasonable  period  of  grace  the  said  organization  shall 
fonhwith  be  incorporated  with  the  Maritime  Customs 
and  th     revenues  above  pledged  shall  l^  administered 
for  the  account  and  in  the  interest  of  the  bondholders." 
An  Audit  Department  under  foreign  supervision  is 
established   in   Article   XIV:     "The   Chinese   Gove-n- 
ment  engages  at  once  to  put  into  effective  operation  an 
Account  and  Audit  Department,  under  the  Provisional 
Regulations  Promulgated  by  a  Presidential  Order  dated 
the    15th   of   November,    1912.    and   published    in    the 
Official   Gazette   of    November    i6th,    1912,    copy    and 
translation  of  which  are  hereto  attached  in  Annex  H  of 
this  agreement,  subject  to  the  understanding  that  any 
modifications  which  may  be  found  necessary  shall  not 
impair  their  effect  in  regard  to  this  loan. 

"The  Chinese  and  foreign  directors  of  the  Bureau 
of  National  Loans  shall  witness  their  approval  of  all 
requisitions  for  loan  funds  by  their  joint  signatures 
thereon.  W'ithdrawals  of  loan  funds  from  the  banks 
shall  be  for  amounfs  corr  ^ponding  to  th  etna'  require- 
ments of  disbursements. 

"Cheques   and/or   orders    upon    !1r    k^ks 
withdrawal  of  loan  funds  shall  he   - 
authorized  representative  of  the  Ministei 
shall  be  sent,  together  with  the  supportn        equisitions 
duly  signed  as  above,  and  the  relative  '  oi       .  to  pay' 
to  a  representative  of  the  banks  to  be  desig.     ed.     The 


f  !-  the 

a  duly 

ance  and 


2C-» 


KORKIGN  FIXAXCIAL  CO  .TROL  IN  CHINA 


said  representative  of  the  banks,  after  satisfying  him- 
self  that  the  expenditure  is  in  accordance  with  Article 
II  of  this  agreement  and  the  annexes  therein  referred 
to,  shall  forthwith  countersign  the  cheque  and  return  it 
to  the  Ministry  of  Finance  for  representation  to  and 
payment  by  the  banks. 

"  Should  the  said  representative  of  the  banks  be  in 
doubt  in  respect  to  disbursement  of  loan  funds  which 
have  been  made,  he  shall  be  entitled  to  make  inquiries 
of  the  foreign  director  of  the  Bureau  of  National  Loans 
and  to  call  upon  him  for  the  production  of  receipts  and 
vouchers  for  inspection." 

The  terms  agreed  upon  were  substantially  those 
demanded  by  the  bankers  at  the  beginning  of  the  nego- 
tiations. The  conclusion  of  the  loan  was  followed  by 
widespread  political  agitation.  Both  the  Senate  and  the 
House  of  Representatives  returned  the  government's 
dispatch  announcing  the  conclusion  of  the  loan  and  re- 
questing its  registration.  Dr.  Sun  took  the  extreme  step 
of  telegraphing  to  the  governments  and  peoples  of  the 
foreign  powers  denouncing  the  loan  as  a  higj;  nded 
and  unconstitutional  matter. 

The  government  had  a  hard  stand  in  defending  its 
attitude  and  action.  The  minister  of  finance  and  the 
president  drew  the  attention  of  the  country  to  the  fact, 
that  foreign  nations  had  pressed  for  payment  of  out- 
standing foreign  loan  charges.     The  following  dispatch 


INTERNATIONAL  (ON TROf.  363 

from  ^he  Provisional  President  was  sent  to  the  Senate 
on  May  7.  I9'3 :  "  "  Further  delay  of  payment  would 
evoke  forcible  interference  in  the  ad:ninistration  of  our 
national  taxes  which  served  as  securities  to  the  various 
loans.  Then  foreign  supervision  of  our  finance  would 
actually  begin  and  the  Republic  would  be  in  danger  of 
bankruptcy.  The  loan  was  an  absolute  necessity  " 

In  a  telega  .,„  Tutuh  Po.  according  to  the  minister 

of  finance,  ..  was  stated :  ^»  "  There  will  be  foreign 
supervision  if  you  borrow,  but  there  will  also  be  foreign 
supervision  if  you  do  not  borrow.  Therefore  it  would 
be  more  advisable  to  undergo  temporary  suffering,  so 
that  there  may  be  a  resurrection  from  that  death." 

The  government's  policy  was  backed  by  the  merchant 
class,  disinterested  patriots  and  the  older  officials,  who 
were  m  favor  of  a  large  loan  being  raised  for  purposes 
of   reorganization   and   economic   development.     These 
parties,-  as  opposed  by  the  loudly  patriotic  press,  the 
students  and  ambitious  politicians  who  perceived  that 
foreign  control  meant  the  curtailment  of  their  oppor- 
tunities -  recognized  at  the  same  time  the  necessitv  of 
foreign  control.     This  is  Mr.  Bland's  opinion,  who  in- 
forms us  that.  "  the  merchants  of  the  Treaty  Ports  and 
generally  speaking,  the  classes  that  have  a  stake  m  the 
country,  are  .  .  .  in  favor  of  expert  supervision  and 

"  See  "  Far  Eastern  Review,"  Vol.  o.  Da«  «i 
"  See  •'  China  Year  Book."  ',g^,,  pa^e^    ' 


264      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

honest  handling  of  foreign  loans,  recognizing  the  fact 
that  only  by  these  means  can  the  money  be  spent  to  the 
country's  economic  advantage." '" 

The  absolute  necessity  of  a  large  loan  might,  perhaps, 
best  be  illustrated  by  an  enumeration  of  the  purposes 
for  which  the  net  proceeds  of  the  loan  were  to  be  used. 
Over  half  of  them  were  for  the  repayment  of  debts, 
while  the  administration  expenses  of  the  Central  Gov- 
ernment (to  cover  a  deficit  in  the  regular  budget),  the 
disbandment  of  troops  of  various  provinces,  and  the 
reorganization  of  the  Salt  Gabelle  only  claim  a  smaller 
portion  of  uses.  The  respective  figures  are  stated  in 
the  appendices  of  the  Loan  Agreement  thus:°' 


B. 
C. 

D. 
E. 

F. 


Liabilities  due  by  the  Chinese  Government: 
(Including  Arrears  of  Boxer  Indemnity, 
repayment  of  advances,  Treasury  Bills,  In- 
terest and  Sinking  Fund  of  previous  loans) 

Provincial  Loans: 

Liabilities  of  the  Chinese  Government  shortly 
maturing : 

Disbandment  of  Troops : 

Current  Expenses  of  Administration: 
(Estimated  from  April  to  Sept..  191.^) 

Reorganization  of  the  Salt  Administration: 

Total 


L  4.317,778 


2,870,000 

3.592,263 
3,000,000 
5,500,000 

2,000,000 


L  21,280,041 

If  taken  at  the  minimum  figure  of  84  per  cent,  the  net 
proceeds  of  the  loan  would  still  leave  a  deficit  of  L280,- 
041.     To  these  requirements  of  the  Chinese  Government 

''"  See  Bland,  op.  cit.,  page  394. 

■'■•'  See  *'  (Thina  Year  Book,"  1914.  pages  397  ff. 


''^^m^Z'^. 


INTERNATIONAL  CONTROL 


265 


then  shouJd  be  added  the  sum  of  L7,cxx),ooo  for  currency 
reform  —  considering  that  the  currency  loan  of   191 1 
has    not    been    floated  —  L3. 000,000    for    Manchurian 
industrial  development  and  many  more  millions  for  the 
eighteen  provinces  for  industrial  development  and  admin- 
istrative reform.     The  financial  requirements  of  China 
in  19 1 2  were  set  forth  in  an  article  in  the  North  China 
herald  of  Sept.  28,  of  which  we  give  the  following 
abstract:     "It  is  necessary  to  state  .  .  .  that  the  mer- 
chants, banks,  and  other  rich  Chinese  who  helped  the 
new  government,  both  during  the  struggle  and  after, 
now  stand  badly  crippled  from  want  of  funds.     They 
have  been  often  told  that  their  outstandings  would  be 
cleared  as  soon  as  the  first  loai.  with  the  foreigner  was 
closed.     Trade  is  badly  in  need  of  the  funds  spent  on 
the  revolution.  ...  The  amount  on  this  score  is  not 
available,  but  the  lowest  estimate  puts  it  at  about  taels 
20,000,000.  ...  It  would  seem  that  if  foreign  loans 
should  serve  any  beneficial  purpose  at  all  for  China,  a 
sum  of  L4o,ooo,ooo  is  necessary  during  the  year  ending, 
say  next  June;  and   further  amounts,  into  the  details 
of  which  it  is  too  early  now  to  go,  appear  likely  to  be 
needed  in  the  coming  years."     And  further:     "There 
is  no  doubting  that  any  syndicate  proposing  to   lend 
money  to  China  should  be  able  to  arrange  for  L4o,ooo,- 
000  during  the  next  nine  months,  and  be  able  to  pay 
about  L6o,ooo,ooo  during  the  next  three  years.     The 


nmi 


266 


I'OREIGX  FINAXCIAI.  CONTROL  IX  CHINA 


original  proposal  of  the  sextuple  group  was  arranged 
on  this  basis,  and  the  total  of  L6o,ooo,ooo  was  agreed 
upon  as  necessary  for  the  regeneration  of  the  country. 
.  .  .  That  the  banks  composing  the  sextuple  group, 
with  their  respective  governments  at  their  back,  would 
be  able  to  supply  China  with  this  large  total  with  more 
facility  than  any  number  of  other  syndicates  is  beyond 
question.  The  Chinese  themselves  know  it,  and  hence 
their  anxiety  to  keep  on  good  terms  with  the  group  in 
spite  of  their  latest  action." 

The  banks  composing  the  syndicate  were  not  only  able 
but  also  willing  to  supply  China  with  all  the  money  she 
needed  —  provided  her  credit  could  be  maintained.     But 
China's  credit  can  only  be  maintained  by  preventing 
indiscriminate  bor  owing  and  wasteful  expenditure  and  by 
enhancing  the  value  of  the  securities  upon  which  her  credit 
rests.     In  order  to  ma  intain  China's  credit  the  bankers  felt 
it  would  be  absolutely  necessary  for  their  financial  agents 
to  have  a   certain   advisory  capacity   during  the  con- 
tract and  a  supervision  over  the  revenues  upon  which  their 
bonds  were  secured  —  last  not  least  so  as  to  place  Chinese 
bonds  at  a  price  that  would  maintain  China's  credit  as 
well  as  the  confidence  of  the  bondholders.     Those  who 
have  criticized  the  attitude  of  the  syndicate,  have,  as  Mr. 
Straight  points  out,  "  in  a  measure  lost  sight  of  some  of 
the   elementary    functions   of   a   banking  house   which 
handles  foreign  loans.     They  have  forgotten  that  it  is 


^— .'^}^^Afc-;r5-"-  <i^.^;t 


INTERNATIONAL  CONTROL  267 

not  the  bankers  themselves  who  provide  the  money  to 
finance  a  foreign  loan,  though  they  may  for  a  time  ad- 
vance from  their  own  resources  certain  preliminary  pay- 
ments.    Bond  issues,  however,  are  sold  to  the  public 
the  bankers  receiving  their  commission  on  the  sale,  and 
the  reputation  of  a  house  of  issue  like  that  of  any  other 
commercial  establishment  depends  upon  the  quality  of 
the  commodity  which  it  sells.     Bankers  would  not  be 
justified  in  requesting  their  clients  to  take  bonds  on  a 
sentimental  and  not  a  business  basis  any  more  than  the 
president  of  an  insurance  company  would  be  warranted 
in  loaning  funds  for  which  he  was  responsible  to  a  per- 
sonal friend  regarding  whose  solvency  he  had  no  guar- 
antee. ...  The  groups   have   not   been  attempting   to 
force  money,  with  humiliating  conditions  attached,  on 
China.     They  have  stated  merely  that  they  are  willing 
only  upon  certain  conditions,  to  loan  the  money  which 
China  has  requested  them  to  furnish.     The  groups  do 
not  insist  that  China  accept  a  loan  if  these  conditions 
are  unacceptable.     They  do  say  that  they  will  not  issue 
Chinese  bonds  on  terms  which  they  regard  as  unsatis- 
factory." «2 

The  position  of  China's  credit  in   1912  was  highly 

unsatisfactory,  for  China  had  neither  sufficient  nor  stable 

security  for  the  amount  that  it  was  necessary  for  her 

to  borrow.     It  was  therefore  imperative  to  build   up 

••-See  Straight,  op.  cit.,  pages  155  and  157. 


I 


'vsasmL'-^'x.^rx.*'  .usi. 


268      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

the  revenues  in  order  to  provide  a  margin  for  future  bor- 
rowing.    The  most  important  security  that  China  could 
offer  for  the  repayment  of,  and  interest  upon,  any  exten- 
sive foreijrn  loans  which  were  required  for  reorganiza- 
tion purposes  was,  by  verdict  both  of  foreign  and  Chinese 
financiers,  the  Salt  Gabeile.     Foreign  lorns  involving  an 
annual  charge  of  about  27,000,000  taels  were  in  1913 
already  secured  upon  this  revenue.     To  this  sum  were 
to  be  added  12,500,000  taels.  constituting  the  annual  in- 
terest upon  the  25  million  Pound  Sterlii.jr  Reorganiza- 
tion Loan,  not  considering,  however,  repayments  of  prin- 
cipal which  v/ere  to  begin  after  the  eleventh  year.     Con- 
sidering that  the  total  revenue  from  salt  hitherto  had 
been  approximately  40,000,000  taels  per  annum,'^^  ^j^gj-e 
was  no  margin  left  for  further  loans,  while  the  main- 
tenance of  this  figure  was  by  no  means  assured. 

The  reform  of  the  salt  revenue  system,  since  19 13, 
has  at  least  equaled  any  reasonable  expectation.  A  few 
figures  have  established  a  glorious  vindication  for  a  rea- 
sonable financial  "  control."  The  results  of  the  salt  tax 
for  1914  proved  to  be  $58,826,000;  the  revenue  of  191 5 
was  $69.000,000 ;  and  the  figure  of  the  salt  tax  revenue 
in  the  Budget  of  1916  is  $84,771,365.'* 

As  in  the  old  days  the  credit  of  the  Chinese  Govern- 
ment was  built  upon  the  foreign  controlled  International 

"See  "China  Year  Book,"  1915,  pag;  310. 
•■><  See  "  China  Year  Book,"  1916,  page  320. 


INTERNATIONAL  CONTROL  269 

Maritime  Customs  Service,  so  has  China's  credit  to-day 
been  materially  enhanced  through  the  reorganization  of 
the  Salt  Gabelle  under  international  control.  That  ad- 
vantages have  accrued  to  China  as  well  as  to  the  world 
from  this  form  of  control  is  beyond  doubt. 


CHAPTER  IX 


CONCLUSION 


It   wa,   the  purpose   of   the   preceding  chapters   to 
analyze  the  problem  of  foreign  control  in  China,  formu- 
lated in  the  introduction,  on  a  scientific  basis.     It  need 
hardly  be  said  that  any  formulation  in  the  field  of  inter- 
national relations  is,  in  the  present  period  of  transition, 
liable  to  undergo  material  alterations,,  although  it  will, 
of  course,  always  retain  a  historical  value.     This  point 
seems  so  clear  that  it  would  require  no  further  illustra- 
tion and  comment  if  it  were  not  for  the  fact  that  the 
struggle  of   international    forces  in   China   presents   a 
problem  of  such  stupendous  difficultiec  and  possibilities 
for  new  complications  as  to  make  the  value  of  a  formu- 
lation doubly  questionable.     In  way  of  conclusion  then, 
we  shall  enlarge  and  comment  upon  certain  important 
aspects  of  the  problem  which  it  has  been  impossible  for 
us  fully  to  explain  within  the  limits  of  the  preceding 
chapters,  and  which,  besides,  it  was  not  strictly  within 
the  purposes  of  the  present  work  closely  to  discuss. 

Things  had  previous  to  the  world  war  reached  a  pass 
in  which  every  power  was  pledged  to  every  other  power 

270 


rONXLUSIOX  271 

to  uphold  the  integrity  of  China,  the  open  door,  and  equal 
opportunity.     But  at  the  same  time  the  veo^  national 
existence  of  China  was  at  stake.     We  have  seen  North- 
ern  and  Southern  Manchuria  parceled  ofif  and  trespassers 
warned  away.  Outer  Mongolia  alienated.   Inner  Mon- 
golia threatened,  and  Shantung,  Fukien.  the  Yangtsze 
Valley  and  the  Southwest  Provinces  reserved  for  special 
exploitation.     All  that  aggrandizement,  disguised  under 
some  railway  loan  and  properly  called  a  "  conauest  by 
railroad  and  bank."  was  primarily  incited  by  the"natural 
pressure  of    .nancial  and  industrial  forces  seeking  ex- 
pansion from  the  constricted  confines  of  the  stronger 
more  advanced  and  over-populated  manufacturing  ^  un- 
tnes- although  it  cannot  be  denied  that  one  or  t.vo  of 
the  powers  had  motives  of  a  purely  political  character 
Foreign  commercial  pressure  was  nothing  new  to  the 
Chinese.     In  fact  it  had  been  exercised,  only  in  a  differ- 
ent form,  for  almost  a  century.     Under  great  pressure 
the  Chinese  were  first  prevailed  upon  to  open  up  a  cer- 
tain number  of  their  ports  as  points  of  contact  between 
themselves  and  the  outsi^.e  world.     As  soon  as  a  foot- 
hold in  the  treaty  ports  was  gained,  began  the  process  of 
seizing  territory.     The  powers  were  always  demanding 
more  privileges  of  intercourse  until  of  late  years  they 
started   this   determined   and   concerted   campaign    for 
spheres  of  interest  and  railway  concessions.     The  for 
eigners  were  eager  to  build  railroads,  not  because  they 


272      FOREIGN  FIXANCIAL  CONTROL  IN  CHINA 

thought  the  Chinese  needed  the  railroads  but  because 
the  foreigners  needed  the  profit  of  the  railroads.     This 
then  is  a  point  of  supreme  significance,  namely:  that 
the  bottom  idea  of  all  the  treaty  stipulations  and  agree- 
ments   as    to    intercourse,    customs,    extraterritoriality, 
spheres  of  interest,  railway  concessions  and  control  was 
not  the  welfare  of  the  people  of  China,  but  the     -ofit 
and  ease  of  doing  business  by  the  people  of  the  West. 
With  the  exception  of  a  few  missionaries  and  a  few 
scholars,  writers  and  artists  who  admire  Chinese  civiliza- 
tion, the  interest  of  the  world  was  a  money  interest  pure 
and  simple. 

That  the  motive  of  foreigners  was  money-making  — 
or   land-stealing -the    Chinese   have    fully    discovered 
from  an  intercourse  of  over  a  hundred  years.     They 
had  also  discoverea  that  under  the  regime  of  extra- 
territoriality, of  international  settlements,  leased  terri- 
tories, concessions,  railway  zones  and  control  of  Chinese 
sovereignty  and  Chinese  rights  were  disregarded  at  in- 
numerable times  and  they  found  that  the  interests  of 
China  were  never  consulted,  although  she  had  to  pay 
the  bills.     These  bills  consisted  of  an  unfavorable  balance 
of  trade  and  a  heavy  foreign  debt,  which  threatened  to 
result  in  bankruptcy  and  the  control  of  China  by  foreign 
governments  acting  for  their  citizens.     China's  financial 
distress  had  mainly  arisen  from  the  burden  of  indemni- 
ties exacted  by  foreigners  and  from  an  increase  of  ex- 


CONCLUSION 


273 


penditures  incurred  to  gain  the  power  of  defense  against 
the  foreigner.     The  obvious  and  natural  way  of  over- 
coming these  financial  diflRculties  would  have  been  for 
China  to  increase  her  exports  over  her  imports,  or  at 
lea  it  to  increase  the  quantity  of  commodities  required 
to  lie  exported  to  maintain  a  commercial  equilibrium. 
But  in  fact  the  tendency  has  been  in  the  direction  of  an 
increase  of  imports.     China  has  never  been  a  creditor 
nation  due  to  the  fact  that  the  foreigner  insisted  upon 
supplying  the  Chinese  with  goods  which  they  did  not 
want  by  creating  an  artificial  demand  for  them,  while 
China  had  nothing  much  to  export  that  the  foreigner 
stood  in  need  of.     The  heavy  excess  of  imports  of  mer- 
chandise over  exports  was  finally  met  to  some  degree  by 
sales  of  large  blocks  of  railway  stocks  and  bonds  which 
should  thus  prove  another  source  of  usefulness  to  the 
foreigner. 

For  all  these  reasons  the  Chinese  showed  an  obstinate 
determination  to  keep  the  foreigner  out  or  to  treat  him 
with  watchful  seclusion  and  to  obstruct  his  designs 
wherever  he  had  to  be  admitted,  or  to  revolt  openly 
against  him.  Indeed  the  Chinese  as  a  nation  have  al- 
ways wished  to  be  left  alone;  they  did  not  desire  the 
presence  of  the  foreigner;  and  any  interference,  even  for 
their  good,  was  resented  by  them.  It  was  resented  in 
an  unmistakable  manner;  for  the  Chinese  have  an  ex- 
traordinar>'  capacity  for  passive  resistance.     Says  Sar- 


I 


! 


274      FOREIGN  FIXAXCIAL  CONTROL  IN  CHINA 

gent : »     "  The  Chinese  may  be  coerced  into  restraining 
their  resentment  for  a  time;  the  history  of  their  rela- 
tions   with    European   powers  proves  amply  that   they 
neither  change  nor  forget.     Once  they  obtain  sufficient 
material  force,  they  are  likely  to  assert,  in  no  uncertain 
fashion,  the  claim  to  that  right  enjoyed  even  by  minor 
Western  nations,  the  right  to  determine  for  themselves 
the  conditions  of  intercourse  with  foreigners.     The  vast 
possibilities  of  the  country  suggest  the  thought  that  the 
consequences,   whether  political  or  economic,  may  not 
redound  to  the  advantage  of  the  Western  nations  which 
have  hitherto  treated   China  as  an  uncivilized   region, 
to  be  exploited  for  the  sole  benefit  of  the  self-elected 
exponents  of  the  ideas  and  methods  of  European  civili- 
zation." 

China's  foreign  policy  has  been  stable  and  decided. 

By  dint  of  intellectual   force  and   superior  diplomatic 

tactics   the   Chinese   have   usually   overcome    the   most 

serious  conditions.     And   in   unmistakable   terms  have 

they  given  the  world  to  understand  that  they  will  not 

be  friendly  with  an  alien  race  which  either  usurps  their 

government  or  assumes  a  dictatorial  attitude  towards  it. 

or  tries  to  exploit  the  country  and   its  inhabitants:— 

until  the  West  woke  up  and  took  stock  of  the  Chinese 

people  and  began  to  reestimate  its  strength  of  resistance 

and  its  potential  power.     Whereupon  it  dawned  upon 

'  See  Sargent,  op.  cit.,  page  309. 


CONCLUSION  27. 

the  world  .ha.  ,h.  Chines,  are  anything  bu.  a  d«ad.n. 
"r  exhausted  race;  on  the  eon.rary.  that  they  possess 
many  qualities  that  go  to  the  making  of  a  strong  and 
efficient  people. 

For  these  and  other  reasons  which  we  shall  mention 
presently,  the  foreign  powers  gradually  moderated  their 
ambitions  with  a  view  of  an  ultimate  abandonment  of 
the  spheres  of  interest  policy  and  a  redeclaration  to  the 
adherence  of  the  "Open  Door"  doctrine  in  its  widest 
sense.     They  began  to  realize  that  further  international 
jealousies,   than   which    there   could   be   nothing   more 
pernicious  to  their  individual  interests,  could  only  be 
avoided  through  an  internationalization  of  Chinese  fi- 
nance and  an  international  participation  in  any  great 
money  transaction.     With  such  internationalization  o> 
railways  and  loans  was  to  be  combined  an  international- 
ization of  financial  control.     Only  thus  could  the  foreig, 
powers  hope  to  enforce  their  tenns- which  was  iu 
understood  by  Count  Hayashi.  when  he  wrote  • «     "  The 
attitude  of  the  powers  towards  China  has  of  recent  years 
undergone  considerable  change.     This  has  put  their  act- 
ing  in   unison   quite   within   the   limits   of   possibility 
^owadays  political  considerations  are  of  minor  impor't' 
ance.  as  compared  with  economic  considerations 
There  IS  no  longer  any  desire  to  obtain  control  of  parts 
of  China,  for  China  is  a  very  difficult  country  to  manage 
'  See  Hayashi,  op.  cit,  pages  302  and  307. 


27(i      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

and  the  population  is  very  large."    Or  again:    "The 
way  to  (leal  with  China  is  for  the  powers  to  combine  and 
insist  on  what  they  want  and  to  go  on  insisting  until 
they  get  it.  .  .  .  Here  are  only  these  alternatives  before 
the   powers.     They  must   either   bring   their  combined 
forces  to  bear  on  China  to  get  what  they  want  or  else 
leave  her  a!'  'e.  until  like  an  awakened  lion  she  is  ready 
to  spring  on  her  prey,  in  which  case  she  will  be  powerful 
enough  to  threaten  the  acquired  rights  of  all  the  powers." 
Notwithstanding  any  possible  political  advantages  of 
international  cooperation  in  China,  it  cannot  be  doubted 
that  the  principal  reasons  underlying  it  were  of  a  purely 
economic  character.     The  financial  world  had,  before  the 
outbreak  of  the  war,  begun  to  consider  the  conception  of 
nations  as  hostile  competitors  in  world  finance  as  one 
economically  unsound.     The  new  and  growing  tenden- 
cies of  a  genuinely  international  finance  tended  towards 
elimination  of  competition  and   towards   consolidation 
and  substitution  of  pacific  motives.     As  the  economic 
standardization  of  the  world  proceeded,  the  cooperation 
of  the  financiers  of  the  various  countries  in  business 
enterpri.,es  in  all  parts  of  the  world  began  to  bind  up 
the   prosperity    of   each   individual  country   intimately 
with  the  -velfare  of  all  other  countries.     Says  Hobson, " 
"  Modern  fmance  is  the  great  sympathetic  system  in  an 
economic  organism  in  which  political  divisions  are  of 
*  See  Hobson,  "  Investment,"  page  122. 


CONCLUSION  277 

constantly  diminishing  importance.  That  which  Christi- 
amty.  justice,  and  humane  sentiment  have  been  impotent 
to  accomplish  through  nineteen  centuries  of  amiable 
effort,  the  consolidation  of  financial  interests,  through 
bourses,  loans,  companies,  and  the  other  machinery  of 
investment,  seems  likely  within  a  generation  or  two  to 
bnng  to  consummation,  namely,  the  provision  of  such  a 
measure  of  effective  international  government  as  shall 
render  wars  between  civilized  r  -s  in  the  future  vir- 
tually impossible." 

In  spite,  or  rather,  in  con.    ..ence.  of  the  present  war 
this  pnncple  of  concerted  action  in  finance  and  diplo- 
macy will  be  no  passing  phase.     I„  a  survey  of  the  future 
•t  IS  apparent  that  nations,  at  least  certain  nations,  will 
become  more  rather  than  less  connected,  and  as  such 
will  often  find  it  advantageous  to  pursue  identical  lines 
of  policy,  especially  in  Oriental  countries.     If  the  world 
IS  to  be  given  a  chance  for  anything  like  a  permanent 
settlement  at  the  conclusion  of  this  war.  the  watchword 
w.ll  have  to  be  "  international  cooperation,"  certainly 
not  international  economic  strife.     The  construction  of 
railways  and  administrative  loans  by  an  international 
syndicate  then  probably  represents  one  line  to   which 
events  point  for  the  Chinese  problem,  which  still  ranks 
as  the  greatest  capitalistic  proposition  of  the  near  future 
Such  cooperation  will  simu''.  ;^Msly  have  the  inherent 
merit  of  being  "a  guarani..  i.r  v,  ..reservation,  rather 


i 


-78     FORi:i(;\  fixaxcial  coxtrol  ix  china 

than  an  instrument  for  the  destruction,  of  China's  in- 
tegrity." as  xMr.  Straight  says."  For  our  investigation 
will  have  it  made  obvious,  that,  when  a  balance  of  inter- 
ests exists  among  the  powers,  China  can  come  out  of 
great  trouble  with  less  damage  than  has  been  the  case 
in  the  era  of  exclusive  spheres  of  interest. 

This  latter  point  is  of  importance  m  view  of  the  fact 
that  a  measure  of  foreign  financial  control  in  some  form 
or  another  has  become  as  essential  to  China's  preserva- 
tion as  the  borrowing  of  foreign  capital.     International 
intercourse  is  as  dependent  upon  legalized  relationships 
as  is  domestic  intercourse  upon  the  preservation  of  law 
and  order.     But  the  insecurity  of  former  times  has  not 
been  remedied  much  by  the  new   Republican   regime. 
That,  because  the  revolution  was  by  no  means  a  revolu- 
tion of  the  Chinese  people  or  of  Chinese  institutions,  but 
merely  the  accidental  triumph  of  a  body  of  politicians 
mainly  due  to  the  treason  of  Yuan  Shih-Kai.     The  in- 
stincts and  traditions  of  Asiatic  races  cannot  be  suddenly 
changed  by  the  drafting  of  a  constitution.     To  quote 
Bland :     •'  Destitute  of  constructive  genius,  without  au- 
thoritative leaders  or  permanent  elements  of  cohesion, 
the  Chinese  Republic  has  been  suddenly  conferred  upon 
a  people  that  neither  wants  nor  understands  representa- 
tive government."  »     The  Chinaman  as  a  factor  in  public 

*  See  Straight,  op.  cit.,  page  120. 
"'  See  Bland,  op.  cit.,  page  147. 


^ 


CONCLUSION 


279 


life  as  the  West  conceives  the  idea  is  as  yet  an  unknown 
quantity.  The  nation,  as  a  whole,  does  not  concern  itself 
with  political  affairs  any  more  than,  on  the  advice  of 
Confucius,  it  concerns  itself  with  theological  affairs.  To 
illustrate  this:  it  has  been  estimated  that  less  than  5 
per  cent,  of  the  population  were  really  concerned  in  the 
overthrow  of  the  monarch v.s 

There  will  be  no  hasty  transformation  of  scene  in 
China,  which  would  be  as  disastrous  to  her  as  an  over- 
investment of  capital.     China's  hope  lies  not  in  a  sudden 
revolutionary  destruction  of  the  old  order,  but  in  slow, 
steady  growth,  by  educative  processes,  which  shall  enable' 
the   nation   to   adapt    itself   gradually   to    its   changed 
environment      Only  in  a  very  small  degree  have  the 
Chinese  begun  to  realize  the  idea  of  nationality,  of  a 
central  government,  of  a  uniform  legal  system,  and  of 
taxation  as  distinguished  from  tribute  and  official  per- 
quisites.    Left  now  to  work  out  her  own  salvation  on 
these  and  other  lines.  China's  progress  would  be  pain- 
fully slow  and  surely  harmful  to  foreign  interests:  — 
therefore  the  necessity  of  a  mild  and  friendly  form  of 
international  financial  "  control."  at  least  in  such  matters 
as  affect  the  foreigner  directly;  of  which  our  Chapter 
VIII  served  as  illustration. 

The  advisability  of  international  financial  cooperation 
and  control  being  established,  there  remains  for  discus- 
•  See  Whelpley,  op.  cit.,  page  270. 


f 


28o      FOREIGN  FINANCIAL  CONTROL  IN  CHINA 

sion   only    the   all    important   question,    whether   such 
cooperation  will  be  possible.     If  Japan  is  prepared  to 
fall  in  with  an  international  scheme  it  will  no  doubt 
stand  a  good  chance  of  being  carried  out.     And  the 
cordial  relations  now  existing  between  Japan,  the  United 
States,   Great   Britain,   and    France   lend   color   to   the 
assumption    that    there    will    henceforth    be    financial 
cooperation  in  China,  at  least  among  these  four  powers. 
Such  financial  cooperation  would  certainly  not  conflict 
with  Japan's  Eastern  Asiatic  Doctrine.     For  the  latter 
aims,  as  does  the  Monroe  Doctrine  in  the  Americas,  at 
a  political,  not  at  an  economic,  exclusion  of  Western 
Powers. 

However,  the  future  is  too  uncertain  even  for  any 
trustworthy  formulation  of  the  new  problems  which  are 
just  shaping  in  the  Far  East.     But  whatever  the  future 
may  hold  in  store,  it  seems  clear  that  we  must  first  adopt 
a  generous,  tolerant  spirit  of  mutual  respect,  if  we  hope 
at  all  to  further  the  cause  of  international  good  rela- 
tions in  the  Far  East.     To  use  the  words  of  Professor 
Brown: '     "  Our  task  becomes  one  of  determining  the 
specific  mutual  interests  which  nations  are  prepared  to 
recognize;  and  then  to  endeavor,  in  a  spirit  of  toleration, 
friendly    concern,    and    scientific    open-mindedness,    to 
formulate  the  legal  rights  and  obligations  which  these 
interests  entail. 

'  Brown.  "  International  Realities,"  page  226. 


CONCLUSION 


281 


"  The  great  preliminary  work  of  facilitating  closer 
relations,  of  removing  misunderstandings,  of  reconciling 
conflicting  points  of  view,  of  identifying  various  inter- 
ests, of  fostering  common  conceptions  of  rights  and  obli- 
gations remains  yet  to  be  done." 

An  absolutely  unbiased  contribution  to  such  prelim- 
inary work  was  our  task. 


'Fi 


I    t-  I 


II. 


BIBLIOGRAPHY 

Official  Documents: 
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^3 


n 


284 


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Curzon,  G.,  Problems  of  the  Far  East.  Westminster,  1896. 

Douglas,  R.  K.,  Europe  and  the  Far  East,  Cambridge.  191.^. 

Harrison,  J.,  Peace  or  War  East  of  Baikal?    Shanghai,  1910. 

Hazen,  C.  D.,  Europe  Since  1815.  New  York,  1910. 

Hornbeck.  S.  K.,  Contemporary  Politics  in  the  Far  East,  New 
York,  1916. 


&■ 


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Ireland   A    China  and  the  Powers,  Boston.  1902. 
Kent,  P.  H.,  Railway  Enterprise  in  China,  London,  1907. 
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Mahan    A.  T.,  The   Problem  of  Asia  and  Its  Effects  upon 

International    Policies,   Boston.   1900. 
Millard,  J.,  Our  Eastern  Question,  New  York,  1916 
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Morse,  H.  B.,  The  Trade  and  Administration  of  China.  Lon- 
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Okakura,  K..  Ideals  of  the  East,  London,  1903 
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Sargent,  A.  J.,  Anglo-Chinese  Commerce  and  Diplomacy   Ox- 
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Schiller,  W.,  Abriss  der  Neueren  Geschichte  Chinas,  Berlin 

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Schumacher,  H.,  Die  Organisation  des  Fremhandels  in  China 

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Williams,  S.  W.,  Anson  Burlingame,  New  York,  1902. 

VII.    Special  Literature  referring  to  Chapter  III : 

Alexinsky.  Gregor,  Russia  and  the  Great  War,  London,  1915 
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Mavor.  J.,  An  Economic  History  of  Russia,  Toronto,  1914. 

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VIII.     Special  Literature  referring  to  Chapter  IV: 

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^'^^i'u^\-nWl^"''V'  ^"  <^°'°'""  Francaises  Chapitre 
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loQo. 

Leroy  Beaulieu,  P.,  De  la  Colonisation.  Vol.  II.  Chapter  XL 


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X. 


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I9I4- 
Franke,  O..  Deutschland  und  China,  etc..  Hamburg,  1914 
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Wertheimer,  F.,  Deutschland  und  Ostasien,  Stuttgart,  1914. 

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Asakawa,    K.,    The    Russo-J-panese    Conflict,    Westminster. 
1904.  ' 

Aubert,  L.,  Paix  Japonaise,  Paris,  1906. 

Autremer,  J.  D.,  The  Japanese  Empire,  London,  1910. 

Dyer,  H.,  Dai  Nippon.  London,  1904. 

Gulick.  G.  L.,  Evolution  of  the  Japanese,  New  York,  1904 

Hishida.  S    C,  Japan  as  a  Great  Power,  Columbia  Studies. 
New  York.  1905. 

Longford.  J.  H.,  Japan  of  the  Japanese,  London,  1911 

Masaoka,  N.,  Japan's  Mes.sage  to  America. 

Murdoch,  J.  and  Yamagata,  A  History  of  Japan,  2  vols.,  Yo- 
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Mead.  A.,  Japan  by  the  Japanese,  New  York   loo^ 
Sujematsu.  K..  The  Risen  Sun,  New  York   iqi^ 
XI.    Special  Literature  referring  to  Chapter  VII- 

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^"''S^i^'   ^■'   ^"''"'^''  Diplomacy  in  the  Orient,   Boston. 
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dans  le  Nord  du  Celeste  Empire.     Economiste  fran^ais. 

^^'"yoVi^.^"'""'"'"  '"^  '^'  ^''  ^"''^'""  Q"«t'on.  N'ew 

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'''^'vTt'  p^ge^,:r'"  ^"'^   ^'^^   ^'"^^^   ^-"-   ^""'-rs, 

'''"^VorSr.-  p^age""!  ^""'^^  «°*  '"^^  ''^^^"^''--'  -"^->'. 

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XII 


'•-^2?'i7?«ilf? 


1' '-^ast-iafft  cj;m:  -t.  ■  ."^-_-(," 


INDEX 


Adams,  John  Quincy,  7,  8. 

Agreements  between: 
Great  Britain  and  China  of 
1886,  1890,  1893,  23:  and 
Germany  defning  policy,  39, 
g6,  147,  148;  and  Japan  of 
190S.  178. 
Japan  and  China  of  1905,  173, 
of  1907,  175,  of  1909,  174, 
175;  and  France  of  1907, 
179;  and  Russia  of  1907,  no, 
179.  183,  of  1910,  110,  180, 
183.  184.  of  1916,  no,  192; 
and  United  States  of  1908, 
179.  202,  of  1917,  191,  193, 
218,  219. 
Russia  and  China  of  1913, 
114;  and  China  and  Mon- 
golia of  1912,  113,  of  1914. 
114,  of  1915,  114;  Manchu- 
rian  agreement  of  190  96- 
98,  of  1902.  98,  99,  01  1909, 
103-107. 

Anderson,  G.  E.,  American  Con- 
sul, 132. 

Anglo-Japanese  Alliance,  42,  43, 
90,  98,  178,  186,  187,   188. 

Balfour.  A.  J.,  29,  32. 
Banks : 
Banque    de    I'lndo-Chine,    61, 

234.  258. 
Deutsch-Asiatische  Bank,  62, 
143.  146,  153,  154.  220,  223, 
231,  233,  258. 
Hongkong  and  Shanghai 
Banking  Corporation,  34, 
45.  4^48,  52,  62,  154,  2ao, 
233,  230,  244,  245.  257. 

289 


International   Banking  Corpo- 
ration, 234. 
Russo-Chinese  (Asiatic)  Bank, 
31.  32,  78,  79.  86,  92,  99,  III, 
112,  247,  258. 
United  States  Banking  Group, 

228. 
Yokohama    Specie    Bank,    172, 
246.  258. 
Brice,  Calvin,  204. 
Billow,  Prince,  139.  140,  147. 
Burlingame,  A.,  18,  197. 

Chang  Chih  Tung.  227,  232. 
China : 

Boxer  rebellion,  41,  42,  44,  96, 
160. 

Control,  Foreign,  Chinese  op- 
position to,  39,  40,  232,  233, 
251,  252,  262,  263. 

Declaration  concerning  resto- 
ration of  Kiaochau,   189. 

Declarations  concerning  non- 
alienation  of  Fukien,  160; 
Hainan,  127;  Shantung,  188; 
Southwestern  Provinces, 
127;  Yangtsze  valley,  30. 

Financial  difficulties,  233,  234, 
236,  237.  248.  264,  265,  272. 

Indemnities,  40,  44,  154,  248. 

Manchu  regime,  24,  238. 

Railways,  concessions,  see  un- 
der Railways ;  regulations, 
39.  40. 

Revenues  hypothecated :  Li- 
kin,  220,  224,  231.  233.  248; 
Maritime  Customs,  16,  17, 
220;  Peking  Octroi.  221; 
Provincial,     221,     234,     231, 


' 


290 


INDEX 


234:   Salt  Gabelle.  221.  ^34. 

Revolution,   -Jji-ij4.  2jj,   jj8, 

.240.  279. 
Sovereignty.      171,     188,     zjj, 

Suzerainty  over  Burma.  23; 
Indo-China,  ikj;  Korea, 
157;  Mongolia,  11  •  Sik- 
kim,  J4. 

Tsungli-Vamen.  15.  j8,  29.  ji. 

China  Association,  30,  46,  88. 
China    Merchants'    Steam    N'avi- 

gation  Co.,  2.)8. 
Chino-Japancse  War.  24.  40.  157. 

158. 
Concessions,  see  under  Railways. 
Control,   foreign    (see  Introduc- 
tion for  definition) : 
British.  35,  49.  50-60,  90,  222. 
French.  130.  131. 
German.   144-147. 
International,     220-228.     232- 
236.  246.  250,  251.  261.  262, 
266-269.    275-279;    Maritime 
Customs    Service,    20.    220, 
22f,  /.;-,   23J,  250,  251,  26(;: 
Salt      Adijnnistration,      258- 
261.  264,  269. 
Japanese,    164,    166,    171.    175- 

177,   182,  191,  194. 
Russian,  79,  80,  82-84,  91,  95, 

q8,   10 1,   107,  no. 
Russo-Belgian,  94,  95. 
Straight,    VV.,    on   control,    57, 
58,   222.   223.   226,   227.   232, 
235-236. 
Conventions  between  China  and 
France, Fournier,  120,  Kuang- 
chouwan,  leasi  of,  126,  rail- 
ways, 120. 
Germany,  Kiaochau,  lease  of, 
127.  Shantung  rys.,  141,  150. 
Great     Britain,     Chefoo,     12. 


Hongkong,  extension  of.  29, 
O'Connor.    23,    Peking,    14, 
Weihaiwei,   lease  of,   28. 
Japan,  confirmation  of   treaty 

of  Portsmouth.  166. 
Russia.    Cassini,    75,    76,    Li- 
aotung  and  Port  Arthur,  85, 
86. 
Cur/on,  Lord.  116. 


East  India  Co.,  i.  4.  5. 
Klgin.  Lord.  10. 
European  War.   155,   187. 
Extraterritoriality.     11.     12,     13, 
20,  107. 


Ferry.  Jules.  123. 
France : 

Commerce  in  South  China, 
131.  132. 

Control,  sec  under  Control. 

Foreign  policy,  colonization. 
131;  expansion,  1 19-126; 
finance.  136;  relations  with 
Russia,  134.  Japan,  74.  158. 
179. 

ludo-Chiua,  liy,  121;  Bank  of, 
see  under  Banks;  Conseil 
Superieur  de,  124,  127; 
Doumes,  Governor,  119,  121; 
railways,  128. 

Kuangchouwan,  lease  of,  28, 
126. 

Loans,  see  under  Loans. 

Protectorate  over  Annam,  22. 
'19:  Cambodja,  119,  122; 
Cochin-China.  1 19.  122 ; 
Tongking,  22,  120-123. 

Railway  concessions,  see  un- 
der Railways. 

Southwestern  provinces,  inter- 
ests in,  25,  127. 
Fukien,  see  under  Japan. 


\  y 


INDEX 


291 


Germany : 
Commerce  in  China,  142,  148, 

«49. 
Control,  see  under  Control. 
Deutsch-Asiatischc    Bank,   see 

under  Banks. 
Diplomacy    and    Finance,    149, 

.'S'-ISJ. 
Financial      Agreement      with 

British  Synd.,  47,  62.  229. 
Financial  methods,  152,  153. 
Foreign  policy,  Biilow  on  col- 
onization,   130;    open    door, 
'39.    148;    place  in   the  sun, 
139;     relations    with    Great 
Britain.  35-37,  39,   147,   ,48, 
IS4.  1 55.  226. 
Government         support         to 

finance,  48. 
Hoangho  valley,  sphere  of  in- 
terest, 36,  146. 
Kiaochau,  lease  of,  24,  28,  127- 

129. 
Loans,  see  under  Loans. 
Railway  concessions,   see   un- 
der Railways. 
Shantung,   hinterland,   25,   31, 
35-37.  14s.  146. 
Goto,  Baron  S.,  167. 
Great  Britain: 
British  and  Chinese  Corpora- 
tion, see  under  Railways. 
Commerce    in    China,    45,    68, 

and  chapter  one. 
Control,  see  under  Control. 
Declaration    concerning     rail- 
way spheres,  34;  Weihatwei, 
36. 
Demands  on  China,  28,  29,  32, 

33. 
Foreign  Office  supports  Bank- 
ing   Syndicate,   45,  49,  244- 
246,  255. 
Foreign    policy,    counter-con- 
cessions, 28,  29;   free-trade, 


aa;  laisser-faire,  65;  non- 
interference, 21,  66;  open 
door,  27,  38;  public  opinion, 
45.  64;  relations  with  China, 
see  chapter  one,  France,  28, 
Germany,  35-37,  39,  147,  148, 
'54.  155.  Japan,  see  un- 
der Anglo-Japanese  alliance, 
Russia,  28,  33-35,  42,  43,  88, 
92,  United  States.  38 ;  vested 
interests,  influence  of,  45,  46. 

Hongkong,  possession  of,  6,  7, 
29- 

Hongkong       and       Shanghai 
Bank,  see  under  Banks. 

Loans,  see  under  Loans. 

Protectorate  over  Burma,  23; 
Sikkim,  24. 

Railway   concessions,    see    un- 
der Railways. 

Weihaiwei,  lease  of,  28. 

Yangtsze  valley,  sphere  of  in- 
terest, 25,  29.  30.  34- 
Grey,  Sir  E.,  252,  254. 

Harriman,  E.  H.,  205-207. 

Hart.  Sir  R.,  17,  41. 

Hay,  Secretary,  38.  178.  199,  aoo. 

Hayashi,  Count.  275. 

Heyking.  Baron,  35. 

Hoangho  valley,  see  under  Ger- 
many. 

Hong  merchants,  2. 

Hongkong,  see  under  Great 
Britain. 

Hoyer.  L.  de.,  iii. 

India  and  opium,  7 

International  financial  coopera- 
tion, necessity  for.  66.  246, 
276-279;  see  also  under 
Loans  and  Railways. 

Japan ; 
Chino-Japanese    war,    24,    40 
73.  '57,  158. 


< 


^.•^i!^^'.SMmS!^^^^...mBiMj^  ''s^ 


Jg^J^gJg 


292 


INDEX 


Commerce  in  China,  163-165. 
Control,  see  under  Control. 
Declaration   concerning    Kiao- 
chau,  189. 

Diplomacy    and    International 

law,  181. 
Eastern        Inner       Mongolia, 
sphere  of  interest,  188-190. 

Economic  forces,  162,  163. 

Finance,  162. 

Foreign  policy,  commercial, 
162-164,  172;  continuity,  181; 
Emperor's  proclamation,  161, 
162;  equal  opportunity  in, 
independence  of  China,  and 
open  door,  177-180,  191,  193; 
harmonization  of  Eastern 
and  Western  civilization, 
157,  161 ;  patriotism,  161 ; 
Pax  Japonica,  194:  Russian 
precedence,  182,  183;  self- 
control,  160;  relations  with 
France,  74,  158,  187,  Ger- 
many, 74,  158,  187,  Great 
Britain,  43,  187,  see  also  un- 
der Anglo-Japanese  alliance, 
Russia,  43,  100,  loi,  156- 
160,  181-184,  United  States, 
191,  202,  218. 

Formosa,  cession  of,  158. 

Fukien,  sphere  of  interest,  25, 
160. 

Government,  form  c '  185,  186 ; 
economic  paternalism,  171, 
172;   Elder  Statesmen,  160. 

Kiaochau,  seizure  of,  187-189. 

Korea,  influence  in,  156,  157. 

Liaotung  peninsula,  renunci- 
ation of,  74,   158-160. 

Loans,  see  under  Loans. 

Pax  Japonica,  194,  195. 

Port  Arthur,  lease  of,  101, 
165,  177,  189. 

Portsmouth,  treaty  of,  165, 
176,   178,  181. 


Railway  concessions,   see   un- 
der Railways. 
Shantung,   sphere   of   interest, 

188,  189. 

South    Mane'  . -ia,    sphere    of 
interes:       •  ().!■  p^rjur-s.      100, 

189,  7  <•:  exploit.itio;.  166, 
167,  J  ^5 :  ("ushnn  ccl'ieries, 
167;    i'ov.niment    ac  ivities, 


170, 


'.:''■ -V    guards, 


168,     169.     176;    zones,    169, 
170;  Simgari  river,  192. 
South    Manchurian    Ry.    Co., 

see  i.nder  Railways. 
"  Special  Interests  "  in  China, 
191,  193. 
Jardine,   Matheson  and   Co.,  see 

under  Railways. 
Jordan,  Sir  J.,  237,  255. 

Knox,    Secretary,    183,   205,   207, 

208. 
Korea,   24,  43,  73,  99,    156,   157, 

160.  176. 
Kuangchouwan,        see        under 

France. 
Knang  Hsu,  Emperor,  206. 
Kuhn,  Loeb  and  Co.,  206,  228. 
Kung,  Prince,  15. 

Lansing,  Secretary,  218. 

Li  Hung  Chang,  73-75.  77,  127. 

Loans,   international   with   Gov- 
ernment support: 
Anglo-German   Boxer   Indem- 
nity, 44,   154,   221,   revenues 
pledged,    221 ;    Tientsin-Pu- 
kow  Ry.,  154,  222-225,  reve- 
nues pledged,  224,  225. 
Anglo-German     and     Franco- 
Russian  Chino-Japanese  war 
indemnity,  40,  41,   134,   154, 
220,    revenues    pledged,   41, 
220,  221. 
Four    Power   Syndicate,   227- 


INDEX 


293 


244 ;  "  Currency  "  loan,  234, 
235,  revenues  pledged,  234; 
"  Hukuang "  loan,  229-234, 
revenues  pledged,  231. 
Six  Power  Syndicate,  246-257, 
and  Five  Power  Syndicate, 
257-262 ;  Reorganization 

loan,  257-262,  268,   revenues 
pledged,  253,  258-261. 

Loans,  private  :  "  Belgian  "  syn- 
dicate, 236.  241.  242:  Cottu, 
236;  Crisp,  253-256;  Ger- 
man, 236,  252;  Japanese,  238. 

Lobanow,  Prince,  75. 

Luzatti,  Mr.,  55. 

Macartney,  Lord,  3. 
MacDonald,    Sir   C,   29,   31,  32, 

84,  92. 
Makimo,  Baron,   164. 
Manchuria,  see  under  Japan  and 

Russia. 
Morgan  and  Co.,  J.  P.,  205,  228. 
Muravieff,  Count,  70. 

Napier,  Lord,  5,  6,  196. 

Okuma,  Count,  161,  181,  185,  187. 
Open    door,    see    under    Great 

Britain,  etc. 
Opium  war,  6,  7. 

Palmerston,  Lord,  5,  21. 
Port    Arthur,    see   under   Japan 
and  Russia. 

Railway  concessions: 
British:  British  ?.nd  Chinese 
Corporation  and  Jardine, 
Matheson  and  Co.,  34,  48- 
61,  67,  90.  concessionaire  of 
Car.ton-Kowloon,  32,  54,  55. 
Chunghowsou-Hsinmintung, 
90,  Nanking-Ping  Hsiang, 
67,    Peking-Newchwang,   34, 


Shanghai-Nanking,  ^2,  53, 
54.  Shanhaikuan-Newch- 
wang,  32,  35,  50-52,  Soo- 
chow-Hangchow,  32,  Tien- 
tsin-Chinkiang,  32,  35,  Ticn- 
tsin-Lukouchiao,  90,  Tien- 
tsin-Shanhaikuan,  ^3,  90; 
Pauling  and  Company's  con- 
cessions, 67,  173;  Peking 
Syndicate's  concessions,  32, 
_  55,  S6. 

French :  Companie  f  rangaise 
des  chemins  de  fer  de  I'lndo- 
Chine  et  du  Yunnan,  128- 
130,  concessionaire  of  Kwei- 
chow  -  Chungking  -  Chengtu, 
133;  Laokai-Yunnanfu,  126, 
128,  133;  Taynan-Chengting, 
133 :  Yunnanfu-Chengtu, 
133- 

German :  Shantung  Railway 
Co.,  142,  145,  concessionaire 
of  Kiaochau-Chinchow,  141 ; 
Kiaochau-Tsinanfu,  141, 143; 
Tsinan-Ichow,  144,  150; 
Tsingtau-Ichow,    144,    150. 

International :  Anglo-German 
Tientsin-Pukow,  37,  62,  145, 
222-226 ;  British-Belgian- 
French  Chinese  Central 
Rys.  Ltd.,  61.  62,  67,  conces- 
sionaire of  Pukow-Sinyang, 
61.  67;  Franco-Belgian  So- 
ciete  d'  P.tude  de  chemins  de 
fer  en  Chine,  93,  conces- 
sionaire of  Kaifenfu-Honan, 
133,  Peking-Hankow,  31,  92- 
94.  134.  Projects,  93,  94,  134; 
"  Tripartite "  and  Four 
Power  Syndicate,  63,  226- 
234,  concessionaire  of  Hu- 
kuang Rys..  133,  227-234. 

Japanese :  South  Manchurian 
Ry.  Co.,  167-171,  185,  189, 
concessionaire    of    Antung- 


i  i:« 


•75^  W 


'^  w^\>Mt^^-?  • 


294 


INDEX 


Mukden,  166,  167.  174, 
Hsinmintiing-Fakiimen,  173, 
Hsinmintung-Mukden,  174, 
Kirin-Changchun,  175,  South 
Manchu'-ian  rys.,  100,  165- 
171,   18.,   184,   189. 

Russian :       Chinese      Eastern 
Ry.,  77.81,  85,  88.  Ill;  Pro- 
jects, 111-113;  Tsitsihar-Ai- 
gun,  III. 
Russia : 

Amur  railway,  70,  no. 

Control,  see  under  Control. 

Declaration  concerning  rail- 
way spheres,  34,  91. 

Diplomacy,  42,  y^^,  74,  g8,  gg. 

Foreign  policy:  Asiatic  policy, 
116-118;  China,  friendship 
with,  73-75,  117;  concilia- 
tion, 108;  Imperialism,  69; 
Li  Hung  Chang,  73,  127;  po- 
litical designs,  96,  99;  rela- 
tions with  France  and  Bel- 
gium, 91,  92,  243,  244,  Great 
Britain,  34,  88-91,  Japan,  7,;. 
74,  100,  loi,  158,  179,  180, 
182,  183. 

Government,  autocratic,  69. 

Kiaochau,  designs  upon,  77,  85. 

Korea,  encroachments  upon, 
99. 

Manchuria,  sphere  of  interest, 
2.S,  3 1-34.  183:  Chinese  East- 
ern ry.,  see  under  Railways ; 
commerce,  109;  Harbin,  87, 
103,  107,  III;  Liao  river,  99; 
Liaotung  and  Port  Arthur. 
24,  28,  85-87;  occupation. 
96;  ry.  "guards,"  84,  102; 
"zones,"  84,  102-107;  resto- 
ration, 98-101 ;  Russification, 
87;  Ussuri  river,  72;  Yalu 
river,  gg. 

Mongolia,  sphere  of  interest, 
112-115. 


F  lilway  concessions,   see    un- 
der Railways. 

Siberian    railway,    71,    72,    84, 
85,  87.   III. 

Vladivostok,  71,  84. 
Russo-Chinei     Bank,  see  under 
Banks. 

Salisbury,   Lord,   27,   28,   31,   23, 

38,  46,  88. 
Shantung,    see    under    Germany 

and  Japan. 
Spheres   of    interest,   .see   under 

Great  Britain,  etc. 
Straight,    VV.    D.,   200,   206,  211, 

213,  215,  216.   222.  228,   232, 

239-241.    244,    247-251,    25s, 

266,  267,  278. 
Sun  Yat  Sen,  237,  238,  251,  262. 

Taft,  W.  H.,  202-204,  211,  228. 
Tang.    Shao    Yi,   206,   211,  239- 

241.  247. 
Treaties : 
Aigun,  71. 

"  Burlingame,"   197,    198. 
Frarce-China  of  1885,  120. 
Japan-China,      Port      .Arthur, 

189,  Shantung,  188. 
Japan-Russia  of  1916,  192. 
"  Mackay,"  44. 
Nanking,  7,  8,  12. 
Peking  Protocol,  44. 
Portsmouth,  100,  165,  176,  178, 

181. 
Tientsin,      France-China,     22 ; 
Great    Britain-China,    10-14. 

L^nited  States : 

American  China  Development 
Co.,  204,  215. 

American  International  Cor- 
poration, 217. 

Chinchow-Aigun  ry.  scheme, 
208. 


^^^^■^  F^tfP^--^\ ,. ..  •  '^t, ?vy>''     ...  ''^  'i^J^  4..^ 


INDEX 


295 


Commerce   in   China,   38,    iq6, 

"Dollar  Diplomacy,"  214,  215. 

Financial  group's  participation 
in  Intl.  Loans,  211,  212,  227, 
228,  see  also  under  Loans. 

Government's  support  to 
group,  211,  212,  217,  218; 
withdrawn  by  President 
Wilson,  212,  213. 

Foreign  policy  in  China: 
Boxer  indeinnity  returned, 
201 ;  Chinese  war,  refusal  of 
participation,  197 ;  "  equal 
opportunity "'  and  "  open 
door,"  38,  178,  197-203,  213, 
219,  protection  of  China,  199, 
201,   219;    unselfishness,    196, 


relations    with    Japan,    178, 
202,  218. 
Manchurian     Bank,     Develop- 
ment,    and      Neutralization 
scheme,  205-210. 

Weihaiwei,     see     under     Great 

Britain. 
Williams,  E.  T.,  115. 
Wilson,  President,  212,  213,  257. 
Wu  Ting  Fang,  204. 

Yamamoto,  Baron,  162. 
Yangtsze  valley,  see  under  Great 

Britain. 
Yuan    Shih    Kai,    237,    238,    242, 

278. 


THE  END 


PMXTED    IV    THE    tJNITBD    STATES    OF    AMBBIC* 


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H.  H.  POWERS'  BOOKS 

The  Things  Men  Fight  For 

By  H.  H.  powers 

"An  able,  unprejudiced  and  illuminating  treatment  of  a  burning 
question." — Philadelphia  North  American. 

$1-50 

'■  Probably  no  othei   book  dealing  with  the  war  and  its 

sources  has  made  so  dispassionate  and  unbiased  a  study  of 

conditions  and  causes  as  does  this  volume." — Nnv  York 

Times. 

"  Out  of  the  unusual  knowledge  born  of  wide  observation 
and  experience  came  this  unusual  1  jok.  We  may  not  al- 
together agree  with  its  conclusions,  out  we  must  admire  the 
breadth  of  it.  and  feel  better  informed  when  we  have 
perused  it.  The  liberal  spirit  of  it  cannot  fail  to  impress 
the  careful  reader." — Literary  Digest. 

America  Among  the  Nations 


Bv  H.  H.  POWERS,  Ph.D. 


$1.50 


"For  an  understanding  of  this  new  crisis  that  we  are 
facing  in  1918  we  know  of  no  book  m.ore  useful  or  more 
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'  America  Among  the  Nations.'  It  is  really  a  biography,  or 
rather,  a  biographical  study.  Its  hero,  however,  is  not  a 
man  but  an  imperial  people." —  Outlook,  New  York. 

"  Mr.  Powers  takes  unusually  broad  views  and  they  are 
enforced  by  a  historical  knowledge  and  a  logical  develop- 
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"All  the  great  problems  that  here  confront  us  are  dis- 
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DR.  WALTER  WEYL'S  BOOKS 


American  World  Policies 

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"  It  is  refreshing  to  read  Dr.  Weyl  ...  his  approach  to  the  prob- 
lem is  absolutely  sound  and  right." —  The  Dial. 

"  An  economic  philosophy  neatly  balanced,  suavely  expressed,  and 
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in  the  United  States 

By  WALTER  E.  WEYL,  Ph.D. 

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in  execution,  it  is  not  merely  for  the  theorist,  but  for  the  citizen." — 
A'czvark  Evening  Neivs. 


The  End  of  the  War 


By  WALTER  E.  WEYL,  Ph.D. 

$2.00 

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The  Development  of  Japan 

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"  This  is  really  a  history  of  Japan  from  the  earliest  times 
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Japanese  Elxpansion  and 
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"  So  much  talk  perfervid  with  alarm  over  the  Japanese 
bog^  is  constantly  blowing  up  and  down  this  country  that 
Prof.  Abbott's  calm-eyed  and  reasonably-minded  book  is, 
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face  of  facts  and  treating  them  in  a  reasonable  way  as  the 
Japanese  situation  needs." — A'.  Y.  Times. 

"A  sober  and  well-reasoned  study  .  .  .  presents  a  sym- 
pathetic account  of  the  development  of  Japan  in  the  Meiji 
era,  points  out  her  present  problems,  and  finds  their  solu- 
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with  Japan,  unless  we  provoke  it." —  The  Dial. 


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Japan  in  World  Politics 


By  K.  K.  KAWAKAMI 


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American  relations  that  will  compare  with  this  little  book 
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the  rights  and  wrongs  of  ill  sides  of  a  question.  It  ought 
to  be  studied  with  care  by  all  those  jingoistic  and  fear- 
tlustcred  Americans  who  break  out  every  now  and  then  into 
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"  Few  men  have  a  clearer  insight  into  the  problems  raised 
by  the  relations  between  the  United  States,  Japan  and  China 
than  K.  K.  Kawakami.  ...  It  will  do  any  American  good 
to  read  '  Japan  in  World  Politics,'  who  apparently  regards 
a  settlement  of  the  far  eastern  problem  as  an  essential  pre- 
liminar)-  to  the  general  disarmament  for  which  mankind 
longs." — San  Francisco  Chronicle. 

"  Mr.  Kawakami  .  .  .  has  written  '  Japan  in  World 
Politics  '  with  the  laudable  purpose  of  clearing  up  the  un- 
fortunate misunderstanding,  of  removing  the  friction  that 
we  all  know  to  be  real  and  serious,  now  existing  between 
us  and  Japan.  The  author  does  his  job  thoroughly.  He 
is  very  frank.  .  .  .  He  overlooks  no  aspect  of  the  subject 
.  .  .  there  is  no  other  work  in  which  Japan's  case  with 
reference  to  America,  Russia,  China  and  the  rest  of  the 
world  is  outlined  so  well  and  so  candidly." —  Chicago  Daily 
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